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2008 (5) TMI 333 - AT - Income TaxInterpretation of Statutes - Eligibility of deduction u/s 80I - developing housing project - clubbed various plots of different sizes - show that land area was more than 1 acre - pro rata deduction in respect of dwelling units having built-up area less than 1,500 sq. ft. - each layout separately would not be adverse to claim deduction u/s. 80-IB(10) - non-fulfilment of conditions prescribed in s. 80-IB(10) - Whether the assessee has fulfilled the conditions prescribed by s. 80-IB(10)? Whether the project is on the size of a plot of land which has a minimum area of one acre? - HELD THAT - As per the assessee, the project is developed on the area of 2.06 acres, while as per the AO, the project is developed in an area of below one acre. In the paper book, the assessee has furnished the certificate from the NIT which is the local authority entitled to approve the housing project. It is evident that the assessee has developed a housing project scheme. In respect of such housing scheme, the assessee got the approval from NIT on six different dates ranging between 11th Jan., 2002 to 15th May, 2002. The area of land covered under each approval was below 4,000 sq. mtrs. but the total area covered together in all the six approvals was 8,370 sq. mtrs. which is more than two acres. Whether by six different approvals, the assessee has developed six different housing projects or it was in pursuance to development of one housing project - From the letter of NIT, it is evident that there was only one housing project for which multiple sanctions were granted, as per the zoning of the plot and access road. This contention of the assessee is further fortified by the brochure circulated by the assessee for the sale of the plot. The copy of the brochure is placed at the assessee's paper book. From the brochure, it is evident that during the year under consideration the assessee developed only one housing project. Merely because for such one project, the approval was taken from NIT more than once, it cannot be said that the assessee developed six different housing projects. In view of totality of the facts, we agree with the finding of the CIT(A) that during the accounting year, relevant to assessment year under consideration, assessee developed one housing project, which was on the area exceeding one acre. Whether the built-up area of the residential unit constructed by the assessee exceeded 1,500 sq. ft. - Applying the ratio of the decision of the Hon'ble apex Court in the case of Virtual Soft Systems Ltd. vs. CIT 2007 (2) TMI 147 - SUPREME COURT , we find that sub-cl. (a) of s. 80-IB(14) has been made effective by the legislature from 1st April, 2005. There is no mention in the Act that the insertion of the definition of the built-up area as above is clarificatory or declaratory. Thus, relying up the decision of the Hon'ble apex Court hold that the definition would be applicable from 1st April, 2005 i.e., for the AY 2005-06 onwards. In our opinion. in the year under consideration, when there is no definition of the built-up area under the IT Act, the definition of the same in the Development Control Regulation, 2000, for Nagpur City would be applicable. However, we find that the relevant facts have not been examined in the light of the above Regulation. We, therefore, direct the AO to examine whether in view of Development Control Regulation, 2000 area of the balcony is to be included in built-up area or not. Thereafter, if the built-up area of any residential unit does not exceed 1,500 sq. ft., then the entire deduction claimed under s. 80-IB(10) would be allowed. However, if the area of the some of the residential units exceeds 1,500 sq. ft., the question would be whether the entire deduction under s. 80-IB is to be denied or proportionate deduction is to be allowed. It would be fair and reasonable to allow the deduction on proportionate basis i.e. on the profit derived from the construction of the residential unit which has a built-up area of less than 1,500 sq. ft. i.e. the limit prescribed under s. 80-IB(10). thus, we direct the AO that if he finds that the built-up area of some of the residential units is exceeding 1,500 sq. ft., he will allow the proportionate deduction under s. 80-IB(10). Accordingly, the appeal of the Revenue is dismissed and cross-objection of the assessee is deemed to be partly allowed as above. In the result, the appeal by the Revenue is dismissed and the cross-objection by the assessee is deemed to be partly allowed for statistical purposes.
Issues Involved:
1. Eligibility for deduction under Section 80-IB(10) of the Income Tax Act. 2. Size of the plot for the housing project. 3. Sale of plots without constructing tenements. 4. Built-up area exceeding 1,500 sq. ft. 5. Pro rata deduction eligibility. 6. Requirement of furnishing audit report in Form CCB. Detailed Analysis: 1. Eligibility for Deduction under Section 80-IB(10): The primary issue is whether the assessee is entitled to deduction under Section 80-IB(10). The relevant section provides a 100% deduction on profits derived from housing projects approved before March 31, 2005, subject to certain conditions. The conditions include the commencement of the project after October 1, 1998, the project being on a plot of at least one acre, and the residential unit not exceeding a built-up area of 1,500 sq. ft. 2. Size of the Plot for the Housing Project: The Revenue contended that the project was developed on plots less than one acre, thus not fulfilling the conditions of Section 80-IB(10). However, the assessee provided a certificate from the Nagpur Improvement Trust (NIT) confirming the development of 8,370 sq. mtrs. (2.06 acres). The Tribunal agreed with the CIT(A) that the project was developed on a single plot exceeding one acre, despite multiple sanctions. 3. Sale of Plots without Constructing Tenements: The Revenue argued that the assessee sold plots without constructing residential units. The Tribunal, however, found that the assessee sold bungalows and not just plots. The plot area was mentioned for identification purposes, but the sale included constructed bungalows, thus fulfilling the requirement of selling residential units. 4. Built-up Area Exceeding 1,500 sq. ft.: The AO included the area of balconies in the built-up area, resulting in some units exceeding 1,500 sq. ft. The CIT(A) and the Tribunal noted that the definition of built-up area, as per the Development Control Regulation, 2000 for Nagpur City, excludes balconies. The Tribunal directed the AO to re-examine the built-up area excluding balconies as per local regulations. 5. Pro Rata Deduction Eligibility: The Revenue argued that any violation of the built-up area condition should result in the denial of the entire deduction. The Tribunal, however, referred to the case of Bengal Ambuja Housing Development Ltd., where it was held that deduction should be allowed on a proportionate basis if the majority of units comply with the size limit. The Tribunal directed the AO to allow proportionate deduction if some units exceeded the built-up area limit. 6. Requirement of Furnishing Audit Report in Form CCB: The CIT(A) held that the mandatory requirement of furnishing an audit report in Form CCB for each layout separately would not adversely affect the claim for deduction. The Tribunal did not find any specific contention from the Revenue on this issue and upheld the CIT(A)'s decision. Conclusion: The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's cross-objection. It directed the AO to re-examine the built-up area excluding balconies and to allow proportionate deduction if some units exceed the built-up area limit. The Tribunal upheld the CIT(A)'s findings on the size of the plot, sale of residential units, and the audit report requirement.
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