2011 (1) TMI 1445 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to deduction u/s 80IB(10) regarding the minimum area of the plot.
2. Entitlement to deduction u/s 80IB(10) regarding the maximum built-up area of residential units.
3. Entitlement to deduction u/s 80IB(10) regarding the completion of the project before the stipulated date.

Summary:

1. Minimum Area of the Plot:
The AO disallowed the deduction u/s 80IB(10) on the ground that the project was constructed on a plot of land less than 1 acre. The AO noted that the original plot was 5100 sq. mts., but 1186 sq. mts. were surrendered to KDMC for a DP Road, leaving 3914 sq. mts., which is less than 1 acre. The CIT(A) confirmed this view. However, the Tribunal referred to the decision in the case of M/s. Umiya Enterprises, which held that the area surrendered for DP Road should not be excluded for determining the size of the plot u/s 80IB(10)(b). Therefore, this objection does not survive.

2. Maximum Built-up Area of Residential Units:
The AO observed that the built-up area of two units in Building No.3 exceeded 1500 sq. ft., including balconies, projections, terraces, and other exclusive areas. The CIT(A) did not accept the AO's contention and held that the built-up area of each unit was 1451 sq. ft. only, excluding the foyer area and open area. The department did not challenge this finding, so this objection does not survive.

3. Completion of the Project Before the Stipulated Date:
The AO noted that the project was not completed before 31-3-2008, as required u/s 80IB(10)(a)(i), due to ongoing litigation regarding Building No.3. The CIT(A) confirmed this view. The Tribunal acknowledged that the project could not be completed due to circumstances beyond the assessee's control (litigation). Referring to various decisions, including Bengal Ambuja Housing Development Ltd. and Brigade Enterprises (P) Ltd., the Tribunal held that proportionate deduction u/s 80IB should be allowed in the ratio of the area completed to the sanctioned area. The Tribunal clarified that the size of the plot should be taken as 5100 sq. mts. for this purpose.

Conclusion:
The appeal is partly allowed, granting proportionate deduction u/s 80IB based on the completed area relative to the sanctioned area, considering the plot size as 5100 sq. mts.