2019 (7) TMI 77 - AT - Income Tax

Deduction u/s 80IB(10) on profit from sale of car parking space - HELD THAT - CIT(A) following the judgment of Hon'ble Bombay High Court the case of Purvankara Projects Limited 2011 (7) TMI 1352 - BOMBAY HIGH COURT and of ITAT in case of Vaman Estate 2012 (10) TMI 1208 - ITAT MUMBAI has held that the AO was not right in law-deduction u/s 80IB(I0) on income from sale of car Parking. It was also held that car parking space forms part and parcel of the housing project, without which even approval for housing project could not have been obtained from competent authority. Therefore, the decision of the Tribunal in holding that assessee is entitled to deduction u/s.80IB in respect of housing project inclusive of the amount received on account of car parking cannot be faulted. We do not deem it necessary to interfere in the said findings of the ld. CIT(A) and the issue is also decided in favour of the assessee - ground of revenue is dismissed Allowing deduction u/s.80IB(10) on the basis of inaccurate measurement of built up area of four flats - HELD THAT - We direct the AO to verify the workings to be given by the assessee in terms of sq.ft to ensure whether the aforesaid four flats after excluding the terrace garden area fall within the limits of 1500 sq.ft. Respectfully following the aforesaid judgement and in view of the aforesaid directions, we deem it fit to remand this issue to the file of the AO to decide the same in the light of the aforesaid decision and in light of the aforesaid directions. Accordingly, the ground raised by the assessee is allowed for statistical purposes for A.Y.2010-11. Not allowing claim of write off of sundry balances - HELD THAT - AR merely made an oral submission that these advances were made in the course of business and the same had become irrecoverable which eventually lead to write off of the same by the assessee during the year. Apart from this oral submission, he could not substantiate his arguments by way of any evidences. Hence, we do not deem it fit to interfere in the order of the CIT(A) in this regard, accordingly, the ground No.2 raised by the assessee for the A.Y.2010-11 is dismissed.

Summary

Issues Involved:
1. Eligibility of deduction under Section 80IB(10) of the Income Tax Act for profit from the sale of car parking spaces.
2. Carry forward of short-term capital loss.
3. Deduction under Section 80IB(10) for profit from sale of residential units with utility rooms exceeding 1500 sq. ft.
4. Deduction under Section 80IB(10) for profit from sale of flats with built-up areas exceeding 1500 sq. ft.
5. Write-off of sundry balances as a deductible expense.

Issue-wise Detailed Analysis:

1. Eligibility of Deduction under Section 80IB(10) for Profit from Sale of Car Parking Spaces:
The primary issue was whether the CIT(A) was justified in deleting the AO's action of denying deduction under Section 80IB(10) for profits derived from the sale of car parking spaces. The assessee argued that car parking spaces are integral to the housing project and cannot be separated for deduction purposes. The AO disallowed the deduction, citing that car parking spaces are not integral to residential units and referred to a Supreme Court judgment regarding the illegality of selling stilt parking areas in Maharashtra. However, the CIT(A) and various tribunal decisions, including those from the jurisdictional High Court, supported the assessee's view that car parking spaces are part of the housing project and eligible for deduction under Section 80IB(10). The tribunal upheld the CIT(A)’s decision, dismissing the revenue's appeal.

2. Carry Forward of Short-Term Capital Loss:
The next issue was whether the CIT(A) was justified in allowing the carry forward of short-term capital loss amounting to ?6,06,15,410. The AO had not discussed this in the assessment order. The CIT(A) directed the AO to verify the records regarding the eligibility of carrying forward the short-term capital loss. The tribunal found no infirmity in the CIT(A)’s order and dismissed the revenue's appeal on this ground.

3. Deduction under Section 80IB(10) for Profit from Sale of Residential Units with Utility Rooms Exceeding 1500 sq. ft.:
The AO disallowed the deduction under Section 80IB(10) for profits from the sale of residential units with utility rooms, asserting that the combined area exceeded 1500 sq. ft. The assessee contended that utility rooms, as per municipal rules, are not habitable and should not be included in the built-up area calculation. However, the CIT(A) and the tribunal upheld the AO's decision, stating that utility rooms sold with residential flats should be considered part of the total built-up area, which exceeded the statutory limit, thereby disqualifying the deduction.

4. Deduction under Section 80IB(10) for Profit from Sale of Flats with Built-Up Areas Exceeding 1500 sq. ft.:
For the assessment year 2010-11, the AO disallowed the deduction for four flats, as their built-up areas exceeded 1500 sq. ft according to the Divisional Valuation Officer's report. The assessee argued that the valuation included terrace garden areas incorrectly. The tribunal remanded the issue back to the AO to verify the built-up areas excluding the terrace garden areas, as per judicial precedents which state that open terrace areas should not be included in the built-up area.

5. Write-Off of Sundry Balances as a Deductible Expense:
The assessee claimed a deduction for writing off sundry balances amounting to ?60,03,282, arguing they were business advances that had become irrecoverable. The AO disallowed the claim due to a lack of evidence. The CIT(A) upheld the AO’s decision, and the tribunal found no reason to interfere, as the assessee failed to substantiate the claim with evidence.

Summary of Judgments:
- AY 2009-10 (Revenue Appeal): Dismissed.
- AY 2010-11 (Revenue Appeal): Dismissed.
- AY 2009-10 (Assessee Appeal): Partly allowed for statistical purposes.
- AY 2010-11 (Assessee Appeal): Partly allowed for statistical purposes.

Order Pronounced: 21/06/2019