2012 (11) TMI 344 - AT - Income Tax

Deduction u/s 80 IB(10) - CIT(A) allowed the claim on pro-rata basis - Held that - There is no dispute to the fact that the project of the assessee was approved prior to 1.4.2005. However, the occupation certificate was received after 1.4.2005 by the assessee. On consideration of the facts as stated by authorities below and also found during the course of survey, it is not in dispute that assessee has allotted two adjoining flats either to same person or to the same family members to enable them to join together and have a bigger unit. Merely because the said flats had been shown in municipal plan to be separate but on physical examination and considering the surrounding circumstances, when it was found that adjoining flats were meant to be a single unit, which was more than the prescribed limit i.e. 1000 sq. ft, it can be fairly concluded that CIT(A) has rightly held them to a single unit irrespective of the fact that there are separate sale agreements entered into by the assessee. AO as well as CIT(A) have categorically stated that the completion certificate is issued by Municipal Corporation only when the plan is approved prior to commencement of project. Though, there is violation/change in the approved plan, assessee firm did not inform the Municipal Corporation nor there is evidence to show or intimation/application was made to Municipal Corporation regarding charges in the original plan. Ld CIT(A) has categorically stated that the partner of the assessee firm himself admitted during the survey action that they had not informed the Municipal Corporation regarding changes in original plan - Thus considering above facts need to agree with CIT(A) that it is not enough if there are documents evidencing an apparent situation, if such documents are made to cover up what could be inferred reasonably as unreal. The position will have to be viewed as per direct observation of the survey team and it was found that one combined flat being shows as two separate units. So, we uphold the findings of CIT(A) on this aspect. Inclusion of balconies and projections in the built up area - Held that - CIT(A) has rightly stated that when the projections/elevations are just have 4 , 3 , 5 and 7 of the floor level, they implies that there are extended area and can be utilized as carpet area. Not only this, CIT(A) has also stated that the booking confirmation/particulars sheets that are made at the time of booking the flats give the exact area that is sold to the buyers and the books impounded and inventoried also give the picture to the actual area sold, and this includes all projections and other common areas. Therefore, agreeing with CIT(A) that the said extended area of projections/elevations/balconies are to be included while admeasuring all the flats and, accordingly, CIT(A) has rightly held that area of some of the flats exceeded the prescribed limit of 1000 sq. ft. . The authorities below have rightly held that assessee is not entitled for deduction in respect of the flats u/s.80IB of the Act. Whether deduction u/s.80IB can be given on prorata basis or not - Held that - As decided in DCIT Versus Brigade Enterprises (P) Limited 2008 (8) TMI 453 - ITAT BANGALORE-A relief could be given to the assessee on pro-rata basis where some of the units exceeded the area limit, thus upholding the order of CIT(A) that assessee is eligible for deduction on pro-rata basis in respect of the flats not exceeding 1000 sq. ft.

Summary

Issues Involved:
1. Eligibility for deduction under Section 80IB(10) of the Income Tax Act.
2. Inclusion of projections and balconies in the built-up area.
3. Pro-rata deduction for units exceeding the prescribed area limit.

Detailed Analysis:

1. Eligibility for Deduction under Section 80IB(10):
The primary issue revolves around the eligibility of the assessee for deduction under Section 80IB(10) of the Income Tax Act. The department disallowed the deduction on the grounds that some residential units exceeded the prescribed built-up area of 1000 sq. ft. The assessee argued that the units were constructed and sold separately, and any combination of units by the purchasers after possession was beyond the control of the builder. The CIT(A) held that the assessee had combined 30 1-BHK flats into larger units, violating the provisions of Section 80IB(10). The Tribunal upheld the CIT(A)'s finding, noting that the assessee's brochures offered the option to combine flats, indicating an intention to construct units exceeding 1000 sq. ft.

2. Inclusion of Projections and Balconies in the Built-up Area:
The next issue was whether projections and balconies should be included in the built-up area. The assessee contended that these should be excluded, especially since the definition of built-up area under Section 80IB(14)(a) was inserted effective from 1.4.2005, and the project was approved before this date. The CIT(A) disagreed, stating that the projections and balconies were part of the residential unit and used exclusively by the buyers. The Tribunal upheld this view, stating that the projections and balconies, even if slightly elevated, should be included in the built-up area calculation. The Tribunal also noted that the definition of built-up area introduced by the Finance (No.2) Act, 2004, was explanatory and applicable to the assessment year in question.

3. Pro-rata Deduction for Units Exceeding the Prescribed Area Limit:
The final issue was whether the assessee could claim a pro-rata deduction for units that did not exceed the 1000 sq. ft. limit, even if some units did. The CIT(A) allowed a pro-rata deduction, relying on various Tribunal decisions, including Sheth Developers (P) Ltd and Brigade Enterprises. The Tribunal upheld this decision, referring to the ITAT Kolkata's decision in Bengal Ambuja Housing Development, which allowed pro-rata deductions for eligible units despite some units exceeding the prescribed limit. The Tribunal dismissed the department's appeal against the pro-rata deduction, affirming the CIT(A)'s order.

Conclusion:
The Tribunal dismissed the appeals filed by both the department and the assessee for the assessment years 2007-08 and 2008-09, upholding the CIT(A)'s order. The Tribunal confirmed that the assessee violated Section 80IB(10) by combining flats into larger units, included projections and balconies in the built-up area, and allowed pro-rata deductions for eligible units.