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2012 (12) TMI 69 - HC - Income TaxEligibility of Deduction u/s 80IB and 80IB(10)- Whether Private terrace area should be included in the built up area of the flats for the purpose of making out statutory extent of built up area as per Clause (a) Section 80IB(14) of the Income Tax Act and deduction in case of constructed flats exceeding built up area of 1500 sq.ft. residential flat / 2000 sq.ft. commercial flat - held that - the open terrace area cannot form part of the built up area; in the result the assessee would be entitled to deduction under Section 80-IB(10) of the Act and that the assessee would be entitled to proportionate relief as regards the units having built up area not more than 1500 sq.ft. 7. As far as the Revenue s contention that for the purpose of Section 80-IB(10) deduction the assessee should have owned the property is concerned the same is liable to be rejected - Decided in favor of assessee.
Issues involved:
1. Eligibility of deduction under Section 80IB and 80IB(10) of the Income Tax Act. 2. Differentiation between developers, builders, and construction contracts for claiming deduction under Section 80IB(10). 3. Cap of 10% for flats exceeding 1500 sq.ft. built-up area for deduction under Section 80IB. 4. Inclusion of private terrace area in the built-up area for statutory extent under Section 80IB(14). Analysis: Eligibility of Deduction under Section 80IB and 80IB(10): The High Court considered the appeals filed by both the assessee and the Revenue against the order of the Income Tax Appellate Tribunal. The substantial questions of law raised by the Revenue focused on the eligibility of deduction under Section 80IB and 80IB(10) of the Income Tax Act. The Court admitted revised questions that delved into whether the conditions under Section 80IB(10) were satisfied by the assessee, the nature of the assessee's role in the project, the ownership of the land, and the measurement of built-up areas for residential and commercial flats. The Court analyzed these questions in detail to determine the assessee's eligibility for the claimed deductions. Differentiation between Developers, Builders, and Construction Contracts: One of the key issues raised was the distinction between developers, builders, and construction contracts concerning the claim for deduction under Section 80IB(10). The Court examined whether the assessee could be classified solely as a contractor based on the agreement with the landowner and if owning the land was a prerequisite for claiming benefits under Section 80IB. The judgment highlighted the Tribunal's decision to remand the case for re-verification of the built-up areas of residential and commercial flats exceeding specified limits, emphasizing the importance of these distinctions in determining eligibility for deductions. Cap of 10% for Flats Exceeding 1500 sq.ft. Built-up Area: Another issue addressed was the application of a 10% cap for flats with built-up areas exceeding 1500 sq.ft. under Section 80IB. The Court scrutinized whether the Tribunal's decision to allow deductions for flats not exceeding the specified sizes, despite constructing larger flats within the same project, was legally sound. The judgment analyzed the implications of this discrepancy in the context of the statutory provisions and relevant case law. Inclusion of Private Terrace Area in Built-up Area: The question of whether the private terrace area should be considered part of the built-up area for determining the statutory extent under Section 80IB(14) was also examined. The Court referred to a previous judgment where it was established that the open terrace area should not be included in the built-up area calculation. This decision influenced the Court's ruling in favor of the assessee, allowing the exclusion of the terrace area from the built-up area and confirming the entitlement to deductions under Section 80IB(10). In conclusion, the High Court dismissed the Revenue's appeals while allowing the assessee's appeals based on the interpretations and clarifications provided regarding the eligibility criteria, ownership requirements, built-up area calculations, and the exclusion of terrace areas for deduction purposes under the relevant sections of the Income Tax Act.
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