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TMI Blog2013 (11) TMI 1673X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case and in law, the Ld. Commissioner of Income Tax (Appeals), Kolhapur was justified in allowing deduction u/s.80IB(10) of the I. T. Act, 1961 when the assessee had violated the condition laid down in section 80IB(10) (c ) of the said Act in constructing the 21 bungalows exceeding the limit of 1500 s.f.t. for each bungalow as provided in the said provision irrespective of the fact that such violation was marginal or more. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals), Kolhapur was justified in not appreciating that in order to claim deduction u/s.80IB(10) of the I. T. Act, 1961 the assessee has to fulfill all the conditions laid down therein and even non-fulfillment of a single condition shall debar the assessee from entitling to deduction under the said section. 4. Whether on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals), Kolhapur was justified in not considering the fact of filing of Miscellaneous Petition by the AO before the ITAT for not considering two grounds in the appellate order passed, when the information relating re-assessment ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsidered the submissions on behalf of assessee all kinds i.e. built up area of two residential units C-5 and D-5 are permissible, built up area of 19 bungalows exceeded permissible limit as per provisions of section 80IB(10) of I.T Act. Accordingly, disallowance was made. 2.2 Matter was carried before first appellate authority, wherein CIT(A) had granted relief after calling remand report. Claim of the assessee was allowed, same has been opposed before us. On other hand, learned Authorized Representative supported the order of CIT(A), inter alia Departmental Representative submitted that order of CIT(A) be set aside and that of the Assessing Officer. 2.3 After going through the rival submissions and material on record, we find that section 80IB(10) prior to amendment to the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 stood as under: "(10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2005 by a local authority, shall be hundred percent of the profits derived in any previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences developme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities and one thousand and five hundred square feet at any other place;21[...] (d) the built-up area of the shops and other commercial establishments included in the housing project does not exceed 22[three] per cent of the aggregate built-up area of the housing project of 23[five thousand square feet, whichever is higher];] 24[(e) not more than one residential unit in the housing project is allotted to any person not being an individual; and (f) in a case where a residential unit in the housing project is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.04.2010). The amended provisions provided for limit for completion of project which was not there in the earlier section. 2.6 Clause (d) was introduced to the provisions of section 80IB(10) by the by the Finance (2) Act 2004 specifying that built up area of ships and other commercial establishments included in the housing project should not exceed 5% of aggregate built up area of housing project or 2000 sq.ft. whichever is less, which is changed to 3% of aggregate area of housing project or 5000 sq.ft. whichever is higher w.e.f. 01.04.2010. 2.7 Clause (a) of sub-section 14 was introduced by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 to define built up area as the inner measurements of the residential unit at the floor lever, including projection and balconies as increased by the thickness of walls, but not including common area shared with other residential units. 2.8 In the instant case, the insertion of definition of built up area in the context of completion of projects which has been approved and which has commenced prior to 01.04.2005 in the amended provision have to be appreciated. As mentioned above, the assessee had undertaken construction of project viz. Bhakti P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound to be exceeding maximum limit of 2000 feet. According to Assessing Officer prior to 01.04.2005 there was no scope under the Act to construct any commercial space, hence, he held that by virtue of constructing and selling commercial space admeasuring 6701.43 feet, the assessee was not eligible for deduction u/s.80IB(10). 2.9 Regarding denial of deduction u/s. 80IB(10) on account of construction and sale of commercial space admeasuring 6701.43 feet in the project sanctioned prior to 01.04.2005 as stated above, the project was approved by competent authority before 01.04.2005 meaning thereby that project was an approved housing project as per local DC Rules. On the date on which the legislature introduced 100% deduction under the I.T Act, 1961 on the profits derived from housing projects approved by a local authority, it was known that the local authorities could approve the projects as housing projects with commercial user to the extent permitted under the Development Control Rules framed by the respective local authority. The local authority could approve a housing project without or with commercial use to the extent permitted under Development Rules as held in CIT, Pune Vs. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee per cent of the aggregate built-up area of the housing project or five thousand square feet whichever is higher. The expression 'included' in clause (d) makes it amply clear that commercial user is an integral part of a housing project. Thus, by inserting clause (d) to section 80IB(10) the Legislature has made it clear that though the housing projects approved by the local authorities with commercial user to the extent permissible under the DC Rules/Regulations were entitled to section 80IB(10) deduction, w.e.f. 01.04.2005 such deduction would be subject to the restriction set out in clause (d) of section 80IB(10). Therefore, the argument of the revenue that w.e.f. 01.04.2005 the Legislature for the first time allowed section 80IB(10) deduction to housing projects having commercial user cannot be accepted." 2.10 Thus, prior to 01.04.2005, there was no scope under Act for an undertaking to construct any commercial space and project should be 100% in order to avail benefit of section 80IB(10) has not found favour with the High Court. Thus assessee was entitled to benefit of deduction u/s. 80IB(10) in respect of profits derived from approved project including profits from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nable when it comes to implementation. Thus, the amendment with respective built up area discussed above was found substantive amendment and not clarificatory one. Accordingly, same has no retrospective effect. 3.1 Without prejudice to the above, the main limb on which deduction was denied was for the reason that area of verandah was not excluded or exempt under section 78(3) of the Bye-laws of Kolhapur Municipal Corporation. CIT(A) following the decision of his predecessor, decided the issue in favour of assessee with regard to 19 bungalows. With regard to bungalows C5 and D5 which admittedly are more than 1500 sq.ft., but were sold to the owners of the land and profit thereof has not been the subject matter of section 80IB(10). Accordingly, no adverse view has taken by CIT(A). Coming back to the issue of built up area as per bye-laws of Kolhapur Municipal Corporation with regard to 19 bungalows mentioned above, we find that Tribunal has set aside this issue to Assessing officer by observing as under; "9. I have considered the submissions of the appellant. Themain issue concerns the definition of built up area. There was no definition in the Act of the term 'built up area&# ..... X X X X Extracts X X X X X X X X Extracts X X X X
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