2017 (1) TMI 118 - AT - Income Tax

Claim of deduction under section 80IB(10) - rejection of claim on the ground that the residential units exceeded the specified limit of 1500 sq. ft. - Held that - The terrace area needs to be excluded from the built up area and if the same is excluded , then the resultant built up area is well within the 1500 sq.ft limit prescribed in the statute and hence rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order. - Decided in favour of assessee

Summary

Issues Involved:

1. Deletion of addition made by AO on account of disallowance of claim of deduction under section 80IB(10) of the Income Tax Act, 1961.
2. Deletion of addition made for depositing employees’ contribution to PF beyond the prescribed time limit.
3. Applicability of section 43B versus section 36(1)(va) read with section 2(24)(x) of the Income Tax Act for employees' contribution to PF & ESI.

Issue-wise Detailed Analysis:

1. Deletion of Addition on Account of Disallowance of Deduction under Section 80IB(10):

The primary issue was whether the built-up area of the Villas constructed by the assessee exceeded the prescribed limit of 1500 sq. ft., thus disqualifying the assessee from claiming a deduction under section 80IB(10). The AO had rejected the deduction claim, asserting that the residential units exceeded the specified limit by including terrace areas as part of the built-up area. The CIT (A), however, allowed the deduction, relying on judgments from the Madras High Court and Bombay High Court, which held that open terrace areas could not be included in the built-up area. The Tribunal upheld the CIT (A)'s decision, noting that the terrace is an open space and does not constitute a built-up area as per section 80IB(14)(a). The Tribunal referenced several case laws, including CIT vs. Mahalakshmi Housing and Commonwealth Developers CD Fountainhead vs. ACIT, which supported the exclusion of open terrace areas from the built-up area calculation.

2. Deletion of Addition for Late Deposit of Employees’ Contribution to PF:

The AO had disallowed the deduction for the delayed deposit of employees' contribution to PF amounting to ?23,310/-. The CIT (A) deleted this addition, referencing the judgments of the Hon’ble Jurisdictional High Court in Jaipur Vidhyut Vithran Nigam Ltd. and CIT vs. State Bank of Bikaner & Jaipur, which supported the view that such contributions, if deposited before the due date of filing the return, are allowable. The Tribunal upheld the CIT (A)'s decision, agreeing that the issue was settled in favor of the assessee by the jurisdictional High Court and the Supreme Court's judgment in Vinay Cement.

3. Applicability of Section 43B vs. Section 36(1)(va) Read with Section 2(24)(x):

The CIT (A) held that employees' contributions to PF and ESI are governed by section 43B and not by section 36(1)(va) read with section 2(24)(x) of the Income Tax Act. The Tribunal agreed with this interpretation, noting that the jurisdictional High Court had already settled the matter in favor of the assessee. The Tribunal found no reason to interfere with the CIT (A)'s finding, thus rejecting the revenue's ground on this issue.

Conclusion:

The Tribunal dismissed the revenue's appeal, upholding the CIT (A)'s order in favor of the assessee on all grounds. The Tribunal confirmed that the built-up area of the Villas did not include the open terrace area, thus allowing the deduction under section 80IB(10). Additionally, the Tribunal upheld the CIT (A)'s decision on the timely deposit of employees' contribution to PF, governed by section 43B, aligning with the jurisdictional High Court's rulings.