2015 (9) TMI 444 - AT - Income Tax

Disallowance of deduction under S.80IB(10) - the commercial space of 11,913 sq. ft. in the project developed by the assessee was more than the prescribed limit of 5% of the total built up area of the project - Held that - In the present case, the plot of land on which the commercial complex was built had already been sold by the assessee and since the commercial complex on the said plot of land was developed by the owners of the land and not by the assessee, we are of the view that the same could not be considered as part of the project of the assessee, especially when the project of the assessee excluding that plot of land independently complied with all the conditions for claiming deduction under S.80IB(10). It is also pertinent to note here that profit arising from the development and sale of commercial complex was duly offered by the owners to tax in their returns of income, and neither they nor the assessee claimed any deduction under S.80IB(10) in respect of the said profit. Out of total 136 units constructed by the assessee in the project, two units bearing Nos.118 and 121 (correct No. is 21, as pointed out by the learned counsel for the assessee) were having built up area of more than the maximum area of 1,500 sq. ft. permissible as per the relevant provisions - Held that - As explained on behalf of the assessee before the authorities below as well as before us, the said unit was built on a corner plot and keeping in view the location as well as the size of the plot, duplex house was constructed, having a built up area of less than 1,500 sq. ft. It is also observed that a copy of the sale deed for residential unit No.21 was filed by the assessee even before the learned CIT(A), but still the learned CIT(A) brushed aside the same, by observing that the same was not sufficient to prove that the built up area of the unit was less than the limit of 1,500 sq. ft. prescribed under S.80IB(10). In our opinion, the said sale deed was sufficient to show that the area of the duplex unit constructed by the assessee as residential unit No.21 was having less than 1,500 sq. ft. built up area and the approved plan annexed to the sale deed further established this position. As demonstrated by the learned counsel for the assessee at the time of hearing before us, this position is duly supported by the copy of the sale deed dated 3.9.2010, placed at page Nos.67 to 78 of the paper-book, which clearly shows that the residential unit No.118 comprising of plot of land as well as a residential unit having only ground floor with built up area of 1,4765 sq. ft. duly completed, was sold by the assessee. The area of the said unit sold by the assessee on 3.9.2010 was having a built up area of 1,475 sq. ft. only and the additional built up area in the form of first floor which was under construction as found by the DVO on 17.12.2011 was done by the owner of the unit and not by the assessee. Both the residential units bearing Nos. 118 and 21 thus were having built up area of less than1,500 sq. ft. as developed and sold by the assessee and in our opinion, there was no violation of any condition as alleged by the authorities below, for claiming deduction under S.80IB(10). - Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of deduction under S.80IB(10) due to alleged non-completion of the project within the stipulated time.
2. Violation of the condition of maximum built-up area of residential units.
3. Violation of the condition of maximum permissible commercial area within the project.

Issue-wise Detailed Analysis:

1. Disallowance of deduction under S.80IB(10) due to alleged non-completion of the project within the stipulated time:
The assessee filed a return of income declaring a total income of Rs. 6,38,627 after claiming a deduction of Rs. 3,29,78,844 under S.80IB(10) for the profits derived from a housing project. The Assessing Officer (AO) disallowed the deduction on the grounds that the project was not completed, as only 91 residential units were sold by the assessment date. The assessee argued that the project was nearing completion with a deadline of 31st March 2012. The CIT(A) accepted the completion certificate dated 12.3.2012, confirming that the project was completed before the stipulated date, satisfying the condition for claiming deduction under S.80IB(10).

2. Violation of the condition of maximum built-up area of residential units:
The AO found that the built-up area of residential unit No.118 exceeded 1,500 sq. ft., as the ground floor was 1,430.97 sq. ft. and the first floor was under construction. Similarly, unit No.121 was a duplex with an area exceeding 1,500 sq. ft. The assessee contended that unit No.118 was sold with only the ground floor completed, and the first floor construction was undertaken by the plot owner. For unit No.121, the assessee claimed the total built-up area was less than 1,500 sq. ft. The CIT(A) did not accept these explanations due to a lack of documentary evidence. However, the Tribunal found that the sale deeds and approved plans provided by the assessee supported her claims, showing no violation of the 1,500 sq. ft. norm.

3. Violation of the condition of maximum permissible commercial area within the project:
The AO observed a commercial complex of 11,913 sq. ft. within the project, exceeding the 5% limit of the total built-up area. The assessee explained that the plot for the commercial complex was sold to third parties who constructed it independently. The CIT(A) held that the commercial complex was part of the project, as indicated in the completion certificate. The Tribunal, referencing a similar case (Lavanya Property Developers Pvt. Ltd. V/s. ACIT), concluded that since the commercial complex was developed by third parties and not by the assessee, it should not be considered part of the project. Therefore, the project independently complied with all conditions for claiming deduction under S.80IB(10).

Conclusion:
The Tribunal concluded that there was no violation of the conditions for claiming deduction under S.80IB(10) by the assessee. It directed the AO to allow the deduction, setting aside the CIT(A)'s order. The Tribunal also noted that even if there were violations in one or two units, the deduction should be proportionately disallowed, not entirely.

Result:
The appeal filed by the assessee was allowed.