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TMI Blog2009 (6) TMI 670X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of three projects, namely, Aishwariya, Netpune and Jupiter, Assessing Officer was not satisfied regarding the claim of the assessee. The common lacunae noted by the Assessing Officer on the claims were that some of the units in the respective projects had a built up area, exceeding one thousand sq. ft. thereby rendering such projects ineligible for claiming deduction under section 80-IB(10) of the Act. During the course of assessment, assessee was required to submit the maps forming part of the occupancy certificate issued by the Bombay Municipal Corporation (in short 'BMC') for these respective projects. After verifying the carpet area and built up area on each of the floors from such the maps, Assessing Officer worked out the ratio of carpet area to built up area. On this basis, assessee was required to submit a chart of built up area of each flat in each of the floors in each of the projects. Requirement of the Assessing Officer was that after ascertaining the carpet area of each of the units, the ratio as arrived at from the maps mentioned supra was to be applied for working out the built up area in respect of each of the flat. In other words, Assessing Officer requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... After rejecting the above work out, Assessing Officer attempted to work out a chart for the various flats, wherein he started from the carpet area, which correctly tallied with what was given by the assessee, and grossed up such carpet area, based on the ratio worked out by him from the maps to arrive at the built up area. To such grossed up area, he added the area of the balcony as relatable to each of the flats for arriving at the final built up area. According to him BMC Rules allowed balcony area for a floor up to 10 per cent of the carpet area and such 10 per cent alone would be excluded for FSI calculation. In the opinion of the Assessing Officer, balcony exceeding 10 per cent of the carpet area had to be considered as a part of the built up area, for, according to him, excess over 10 per cent would deplete the FSI availability with the assessee. Though the Assessing Officer noted that by amendment through Finance (No. 2) Act, 2004, which came into effect from 1-4-2005, built up area was defined to include the projections and balconies he was nevertheless of the opinion that prior to assessment year 2005-06, it could not be considered so. However he proceeded to add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the opinion that it was highly complicated. According to him built up area as understood in common parlance Id meant area enclosed by the outer boundary of the external walls and instead of following this method, assessee had followed a complicated method leading to irrational results. Thus, effectively, Assessing Officer denied the claim of the assessee under section 80-IB(10) of the Act in respect of projects Aishwariya, Netpune and Jupiter. It has to be noted that the denial of the claim was made solely on the reason of exceeding the flat area limit and but for that no other disqualifications were ever found by the Assessing Officer. Thus the claim of deduction of Rs. 8,42,47,434 under section 80-IB was not allowed. 7. In its appeal before the learned CIT(A), in respect of the project Aishwariya, first submission of the assessee was that balcony could not form part of the built area. In fact this submission applied to the claims on all the projects. Assessee contented that balcony as defined in the rules of the BMC Rules was relevant only for the purpose of calculation of FSI and had nothing to do with the meaning of built up area as per the Income-tax Act with referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work out was relevant. 9. Learned CIT(A) noting that the work out given by the assessee for built up area included the area of the wall thickness came to a conclusion that built-up area in none of the flats exceeded 1000 sq. ft. and assessee was therefore for deduction under section 80-IB(10) in respect of the Neptune project. According to the CIT(A) Assessing Officer's opinion that the working of the assessee was not cross verifiable was not correct. Ld. CIT(A) further noted that assessee had given such workings in relation to each of the units, which exceeded carpet area of 80 sq.mtrs. and the built-up area of flats in floors 'A', 'B' wings of the Neptune project tallied with built-up as per the approved BMC plan. Learned CIT(A) was also of the opinion that calculation adopted by the Assessing Officer by grossing up the carpet area based on a ratio was incorrect. Therefore, accepting the workings given by the assessee, he directed the Assessing Officer to allow it deduction under section 80-IB(10) of the Act in the case of Neptune project. 10. Now coming to the last of the projects involved in the controversy, namely 'Jupiter' project, assessee's submission was that the differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) directed allowance of such deduction for Jupiter and Neptune projects. According to the revenue CIT(A) had accepted new evidence in the form of work out of built-up area in respect of these projects which was in contravention of rule 46A of the Income-tax Rules. As against the above assessee is aggrieved that it was denied deduction under section 80-IB(10) of the Act with respect to Aishwariya project. 12. Before us the learned Departmental Representative, initiating the arguments, strongly supported the orders of the learned CIT(A) vis-a-vis the disallowance of deduction under section 80-IB for Aishwariya project whereas he strongly assailed the order of CIT(A) for allowing such deduction on Neptune and Jupiter projects. According to him, definition of built up area as introduced by the Finance (No. 2) Act, 2004 would apply retrospectively and, therefore, such term had to be understood as though, it always included therein projections and balconies. According to him if the balconies were also considered, without dispute, both the Neptune as well as Jupiter projects would fall out of the purview of section 80-IB of the Act. According to him sub-section (14) of section 80-IB wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er had considered a wrong interpretation of law, revenue could raise this contention. Therefore, he submitted that, CIT(A)'s decision to exclude balcony area and go by the measurements given by the assessee in respect of Neptune and Jupiter Projects were incorrect. Further submission by the learned D.R. was that even if retrospectivity of clause (a) of sub-section (14) of section 80-IB was not accepted , definition of built-up area would necessarily include balconies in view of the Development Control Rules of BMC. According to him, as per such Development Control Rules, balcony area in excess of 10 per cent of the carpet area was to be deducted from the FSI thereby implying that such excess would form a necessary component of built-up area. Therefore, in his opinion, in any view of the matter, balcony had to be considered for computing the built-up area. In support of the order of the learned CIT(A) sustaining the disallowance of deduction for Aishwariya project, learned D.R. submitted that assessee by itself had admitted to some flats exceeding 1000 sq. ft. and therefore failed in satisfying one of the essential condition specified in clause (c) of sub-section (10) of section 80- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the thickness of the walls was the correct approach, and the assessee had worked out on this basis for all the three projects and submitted such work outs to the Assessing Officer, which were arbitrarily rejected by the latter. According to him the learned CIT(A) had correctly appreciated such work out and accepted the contentions of the assessee vis-a-vis Neptune and Jupiter projects. In any case it was submitted that Assessing Officer himself had considered the amendment defining built-up area vide clause (a ) to sub-section (14) of section 80-IB of the Act to be prospective and the revenue could not be allowed to improve upon the case of the Assessing Officer. Assessing Officer himself having admitted to the non-retrospectivity, according to the learned counsel for the assessee, allowing the revenue to approbate and reprobate according to the circumstances, would be a travesty of justice. Learned counsel for the assessee also brought to the attention of the Bench that subsequent to the assessment, the Assessing Officer concerned had referred the issue regarding measurement of various flats in all the three projects in dispute to the Departmental Valuation Officer. According t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different tangent for ascertaining the built-up area. 16. We have heard the rival contentions and perused the orders. First we take up the common issues involved in all the three projects. These common issues can be summed up in three questions :- (1)Whether the method followed by the Assessing Officer in grossing up the carpet area to arrive at the built-up area based on a ratio arrived at on the floor map appended to the occupancy certificate was correct; (ii) whether built up area can include balcony, especially so, since the Assessing Officer himself considered Finance (No. 2) Act, 2004 introducing clause (a) to sub-section (14) of section 80-IB to be prospective in effect; and (iii) if the definition of built up area as aforesaid is not retrospective can the definition of built-up area as adopted by the BMC be considered as applicable for taxation purpose also. 17. Taking the first question, definition of built-up area as per clause (a) to sub-section (14) of section 80-IB runs as under :- "built-up area means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sub-section (14) of section 80-IB and first decide whether it is retrospective or not. For brevity, this definition is reproduced once again hereunder : "(14) for the purpose of this section:- (a)'built-up area' means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units." Though, both the learned D.R. as well as the learned A.R. have delved into a large number of cases for their respective contentions for and against retrospectivity, we find that the answer to this question can be found easily from the definition itself. The definition says built-up area 'include' projection and balconies. The accepted rules of interpretation for an inclusive definition as elucidated by the Hon'ble Apex Court in the case of CIT v. Taj Mahal Hotel AIR 1972 SC 168 is that if the word 'include' is used in an interpretation clause, it must be construed as comprehending not only such things as it signify according to their nature and import, but also things which the interpretation clause declares that they shall include. So norm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere can be no estoppel against law even if the Assessing Officer himself had taken a different view becomes irrelevant on the face of our finding that definition of built-up area is only prospective with effect from 1-4-2005. Thus prior to 1-4-2005, balcony would not form part of the built-up area, irrespective of the area of such balcony. 19. Having come to a conclusion that definition of built-up area as in sub-clause (a) of sub-section (14) of section 80-IB had only prospective effect, we have to decide whether the Assessing Officer's view that definition as per BMC Rules has to apply is correct. BMC Rules vide sub-para 22 of para 38 of the Development Control Regulations for Greater Bombay 1991 runs as under : "(22) Balcony - In any residential zone (R-1) and residential zone with shop line (R-2) or in a purely residential building in any other zone, balconies may be permitted free of FSI at each floor, excluding the ground and terrace floors, of an area not more than 10 per cent of the area of the floor from which such balcony project subject to the following conditions : (i)No balcony shall reduce the minimum marginal open space to less than 3 m. at the rear and sides and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the specific reasons why its claims were rejected in relation to the three projects. 20. Taking project 'Neptune' as mentioned in para four above, assessee had given a work out of built-up area by aggregating carpet area to wall thickness area. Of course, assessee had not given the work out in respect of every unit in the project, but wherever the carpet area exceeded 60 sq.mtrs.(equivalent to 645 Sq. Ft.) it had indeed given the work out. There is much strength in the argument that any addition of wall area thickness would not take it beyond 92.25 sq.mtr. which is equivalent to 1000 sq. ft. Assessing Officer had rejected this work out only for the reason that the area so worked out was not equal to the built up area as per the BMC plan. We find that this issue has been correctly answered by the learned CIT(A) when he has given a finding that on verification the total built up area of all the four flats of A & B Wing of Neptune Project tallied with the built-up area of the floor as per the approved BMC plan. Nothing has been brought on record by the learned A.R. to rebut this finding. Down the line, if we see the DVO report dated 12-5-2008 it corroborates assessee's contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10) for Jupiter project also. 22. Coming to the last of the three projects, namely, Aishwariya, apart from the common reasonings for rejecting assessee's work out of the built-up area, Assessing Officer has also noted that in the workings submitted, assessee itself showed a built-up area exceeding 1000 sq. ft. in one flat each of first to eighth floors of Wing 'A'. We have already ruled against considering any part of the balcony area for calculating the built-up area and also held that measurement based data furnished by the assessee with regard to the built-up area, is in accordance with commonly understood meaning of the term 'built-up area'. In the case of Aishwariya project, no doubt assessee's own workout show that some of the flats had built-up area exceeding 1000 sq. ft. Even the DVO's work-out show that built-up area of flats in Block A and built-up area of eight flats out of sixteen flats in respect Block B exceeded 1000 sq. ft. However in blocks C to E which consisted of 96 flats, the built-up area were less than 1000 sq. ft. in each of the case. Thus, without doubt by assessee's own admission, at least in a few cases, the built-up area exceeded 1000 sq. ft. Now the qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions should be interpreted liberally and since in the present case also, the assessee by claiming pro rata income on qualifying units has complied with all the provisions as contained in the said section, in our considered opinion, such claim of the assessee was rightly allowed by the ld. CIT(A) by reversing the order of the Assessing Officer." Again in the case of Brigade Enterprises (P.) Ltd. (supra) decided by the Bangalore Bench of this Tribunal, it was held that where some of the residential units in a bigger housing project if treated independently were eligible for relief under section 80-IB(10), then relief should be given pro rata and should not be denied by treating the bigger project as a single unit. Again we find that a similar issue had come up before the Nagpur Bench of this Tribunal in the case of ITO v. AIR Developers [IT Appeal No. 447 (Nag.) of 2007, dated 21-5-2008]. After referring to the decision in Bengal Ambuja Housing Development Ltd.'s case (supra), it was held by the Tribunal at para 6.7 of its decision dated 21-5-2008 as under : "The ratio of the above decision of the ITAT, Kolkata Bench would be squarely applicable to the case under consideration bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project. Thus, the quantum of deduction under section 80-IB(10) in respect of the Aiswariya project for the flats which have built-up area less than 1000 sq. ft., has to be worked out on pro rata basis in line with our discussion in the preceding paras. 23. In the result, Grounds 1 to 3 of the revenue stands dismissed, whereas grounds 1 to 4 of the assessee are allowed. Assessing Officer is directed to verify the claim of the assessee for deduction under section 80-IB(10) of the Act in respect of Aishwariya project and allow it deduction on pro rata basis in respect of flats having built-up area less than 1000 sq. ft. Needless to say assessee is to be given a reasonable opportunity of representing its case. 24. Before parting with the matter it would be inappropriate for us not to deal with one grievance taken by the revenue as a part of one of its grounds, more specifically ground number three, regarding admission of additional evidence by the Ld. CIT(A) in violation of rule 46A. We find that the ld. CIT(A) had not relied on any new evidence. What were made available before him by the assessee were the very same plans and work-outs, which were given by it before the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and if it was to postpone the debit of the expenses relating to the home for aged and Club House, till the sale of the last building, it would result in abnormal losses in such year. Further contention was that the construction was completed in the relevant previous year though commenced in financial year 2002-03. Ld. CIT(A) was of the opinion that the expenses are to be allowed since assessee was following project completion method for accounting its income. According to the learned CIT(A) the expenses incurred were for business purposes and related to the project and the assessee had correctly claimed it as expense in its Profit & Loss Account. Thus he deleted the disallowance. 29. Now before us the learned Departmental Representative strongly supported the order of the Assessing Officer. Per contra, learned A.R. reiterated the contentions made before the CIT(A). 30. We have heard the rival contentions and perused the orders. There is no doubt that assessee had incurred the expenditure of Rs. 1,16,25,414 on home for aged and Club House and this was a part of 'Vasant Leela project'. There is also no dispute that assessee had completed 6,40,990 sq. ft. out of the total planned ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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