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TMI Blog2011 (1) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... fit of M/s. Sab Realty of ₹ 59,75,060/- which was claimed as exempt u/s.80IB (10) of the Act. The AO noted that the project under construction comprised of three buildings named as Building No.1 (A-Wing), Building No.2 (B-Wing) and Building No. 3 (C-Wing). Buildings No.1 & 2 comprised of only flats, while Building no. 3 comprised of two identical bungalows. The AO noted that during the year under consideration, i.e. asstt. year 2005-06, the assessee had completed Building No. 1 (i.e. A-Wing) of the project "Anant Regency, Phase-II", for which permission was sought from the Kalyan Dombivli Municipal Corporation, Kalyan (hereinafter referred to as 'KDMC, Kalyan') on 23-05-2002 and the last plan was passed by KDMC, Kalyan, on 0606-2006. The AO further observed that after the issue of show cause letter on 05-12-2007, the assessee had submitted another approval from KDMC, Kalyan, dated 17-12-2007. Thus, he found that during the year under consideration, Building No.2 (i.e. B-Wing) was under construction and for Building No. 3 (i.e. CWing), the construction had not yet started as its approval was obtained after asstt. year 2005-06. Thus, he concluded that the project 'Anant Regency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... noted that as per the plan submitted by the assessee and his architect and plans obtained from KDMC, Kalyan, it is seen that the total area of original plot was 5,100 sq. mts. However, 1186 sq. mts. of land, which was part of the original plot, had to be surrendered to KDMC, Kalyan, for a 18 mts. wide D.P. Road and the remaining area left for the project was 3914 sq. mts., which was less than 1 acre. Thus, the area of the plot on which the project stands and the area around which the assessee or housing society can construct boundary wall and the area of plot of land which is in assessee's possession for the purpose of construction remains 3914 sq. mts., which is less than 1 acre. Therefore, deduction u/s.80IB (10) is not allowable. ii) Maximum built-up area of the residential units of 1500 sq.ft: The AO observed that in view of the requirements of sec. 80IB (10) (c), the assessee's project being more than 25 kms. away from the local limits of Mumbai, built-up area of 1500 sq. ft. is allowed. He pointed out that built-up area, as commonly understood or as adopted by builders or Municipal Corporations, is different from the built-up area for the purpose of sec. 80IB (10) as defin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e KDMC, Kalyan, there was a stay on further construction of Building No.3 as the matter was with MRTP. Since the matter had not been disposed of, the stay continued. He further noted that as per answer to Question No.11 of the statement dated 26-11-2007 u/s.131 of the I.T. Act, the Architect for the project, Shri Dilip Tambday, had stated that even if the work was resumed, the project would not be completed in less than 6 months time. The AO, therefore, pointed out that the project could not be completed before 31-3-2008. In view of above conclusions, the AO wrote another letter dated 5-122007 to the assessee along with copies of statements of Shri Dilip Tambday, Architect, and required the assessee to explain and show cause as to why the deduction of ₹ 59,75,060/- should not be disallowed. The assessee through his advocate submitted a letter dated 17-12-2007 which has been reproduced at pages 11 to 13 of the assessment order. After considering this reply, the AO finally concluded as under: i) Minimum Area of one acre of the plot: This requirement is not fulfilled because the area of plot of land surrendered for public use or common use to the local authority cannot be sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en reproduced at page 5 of his order. Copy of remand report was furnished to the A.R. of the assessee and the reply of A.R. of the assessee dated 1-5-2008 is contained at para 6 of his order. In this reply, the assessee pointed out that he had completed the construction of Building No. 1 on 28-2-2005 and that of Building No. 2 on 15-9-2006. However, the two row houses known as Building No.3, though commenced, were not completed prior to 31-3-2008. It was, therefore, submitted that the assessee may be held to be eligible for the benefit of deduction u/s.80IB (10) to the extent of profit derived in respect of the two Buildings, being Building nos.1 and 2, completed by the assessee prior to 31-3-2008 in compliance with the terms of the provisions of sec. 80IB (10). The ld. CIT(A), however, confirmed the order of AO for the following reasons: 1. The project has been constructed on a plot the size of which is less than 1 acre in area. 2. The project has not been completed before 31-3-2008. However, he did not accept the AO's contention that the build up area of each residential unit was more than 1500 sq. ft. He pointed out that the foyer area and the open area cannot be considered f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2009)/25 DTR 287. 4. ACIT vs. Sheth Developers (P) Ltd.33 SO 277 (Mum.). 5. G.V. Corporation vs. ITO 38 SOT 174 (Mum.). 5. The ld. D.R. submitted that as per sec. 80IB (10) (b) the project should have been constructed on the size of plot of land which has a minimum area of 1 acre. He submitted that the land surrendered to KDMC, Kalyan, could not be treated as part of land on which construction had been made and, therefore, this condition had not been fulfilled. He further pointed out that admittedly Building No.3 was not completed by 31-3-2008 which was the dead-line for completion of the project and, therefore, since the project as such was not completed before the cut-off date, deduction under sec. 80IB(10) could not be allowed as the basic condition cannot be waived. 6. We have considered the rival submissions and perused the record of the case. The main issue is regarding fulfilment of conditions laid down u/s.80IB (10) for claiming deduction in respect of profits and gains derived by an undertaking carrying on business of developing and building housing project approved before 31-3-2007. The first reason for denial of deduction was on the ground that the plot area on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one acre. In our opinion, the CIT(A) committed an error in simply excluding 656.75 sq. metres from the area of 4600 sq. metres without appreciating that the exclusion is only for the purpose of D.P. Road which does not reduce the size of the plot as a whole. We are therefore satisfied that there is no violation of the conditions prescribed by clause (b)." In the present case, we find that at page 56 of the paper book there is a statement of area, as per which area of plot is 5100 sq. mts., out of which 1186 sq. mts. of land had been deducted for DP Road, leaving behind 3914 sq. mts. As per the decision of Tribunal in the case of M/s. Umiya Enterprises noted above, this area surrendered for DP Road could not be excluded for determining the size of the plot as contemplated u/s.80IB (10) (b). Therefore, this objection does not survive. The second reason for denial of deduction was on the ground that size of individual units of Building No.3 was more than 1500 Sq. fts. This objection has not been sustained by ld. CIT(Appeals) and department has not challenged these findings. Therefore, this objection does not survive. The third reason for denial of deduction was on the ground tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Bangalore South Taluk. This macro project comprised certain housing blocks, community hall etc. as its micro components. It comprised, among other things, 5 residential blocks by name Mayflower, Cassia, Magnolia, Jacaranda and Laburnum. Approval had been obtained from BDA on 24-5-2002. The assessee took two blocks separately, viz., Mayflower and Cassia, and claimed the benefit of deduction u/s.80IB of the Act in respect of the said two blocks, claiming them to be separate projects, as only the said two blocks could fulfil the requirements prescribed u/s.80IB of the Act. The AO, however, denied the claim of deduction u/s.80IB treating Brigade Millennium as only one project. The Tribunal, after considering the facts, observed that the use of the words "residential units" means that deduction should be computed unitwise. Therefore, if a particular unit satisfies the conditions of sec.80IB, the assessee is entitled for deduction. Therefore, the Tribunal upheld the order of ld. CIT(A) in allowing deduction u/s.80IB(10) in respect of two blocks as claimed by the assessee. 6.3 In the case of ITO vs. AIR Developers (supra) also, inter alia, the dispute was that since the built up area o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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