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TMI Blog2016 (2) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... on u/s 80- IB(10) of the Act was to be allowed on proportionate basis with reference to qualifying residential units and that the assessee would not be denied claim for deduction u/s 80-IB(10) of the Act in entirety if some of its residential units were of a built-up area exceeding the limit prescribed in clause (c) to sec. 80-IB(10) of the Act. Excluding residential units RH/D-6 and RH-3 of project ‘Akshay Park’ from the purview of deduction u/s. 80IB(10) on the ground that the ‘built up area’ of said units are in excess of 1500 sq. ft. - Held that:- The issue whether the definition of ‘built up area’ as defined u/s. 80IB(10) is to be applied in case of projects approved prior to 01- 04-2005 is no more res-integra. In view of the decisions of Co-ordinate Bench on the issue, we hold that prior to the insertion of definition of ‘built up area’ by the Finance (No. 2) Act, 2004 w.e.f. 01-04-2005, projections, balconies and open terrace cannot be considered as part of the ‘built up area’ of the residential unit. The newly inserted definition of ‘built up area’ would be applicable only on the projects which are approved/sanctioned after 01-04-2005. In view of the facts of the case and v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Revenue has assailed the order of Commissioner of Income Tax (Appeals) by raising following grounds in appeal: 1. "Whether on the facts and in the circumstances of the case and in law, the CIT(A) was justified in not rejecting the assessee's claim of deduction u/s 80IB(10) of the IT Act, 1961, when the CIT(A) himself has agreed that the built up area of 2 dwelling units i.e. RH/D-6 and RH-3 in the project exceeded the restriction resulting into clear violation of clause (c) of subsection (10) of Section 80IB rw clause (a) of Sub-section (14) of Section 80IB of the IT Act, 1961 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the assessee was entitled to deduction u/s 80IB(10) of the IT. Act, 1961 on pro-rata basis in respect of eligible units, when there is no such provision in the Act? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in granting deduction u/s 80IB(10) on proportionate basis to individual dwelling units whereas as per section 80IB(10), the deduction is allowable to the project as a whole on the fulfillment of prescribed conditions by the entire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... culated by the Govt. Valuer in respect of the above said two dwelling units in excess of 1500 sq. ft. after including balconies, cover project terrace is not correct. The ITO in his comments address to Commissioner of Income Tax (Appeals) has admitted the fact that both the dwelling units have two terrace/balconies which are open to sky, and is not covered by walls. The ld. AR made an alternate submission that the definition of 'built up area' has been inserted in section 80IB(14) by the Finance (No. 2) Act, 2004 w.e.f. 01-04-2005. Whereas, the project under question was sanctioned on 31-03-2001 which is much prior to the date of introduction of the definition of 'built up area'. The assessee had completed the project on 31-03-2008. Thus, the amendment brought in by the Finance (No. 2) Act, 2004 will not apply in the case of assessee. The ld. AR further contended that the Tribunal has been consistently holding that projections and balconies are not to be included while computing the total built up area of a single unit of a project approved prior to 1st April, 2005. In support of his submissions, the ld. AR placed reliance on the following decisions of the Tribunal: i. Haware Cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agree with the contention of the ld. DR. The Tribunal in various decisions has held that the assessee is eligible to claim deduction u/s. 80IB(10) on the eligible dwelling units. The view of the Tribunal has been upheld by various Hon'ble High Courts. In the case of CIT Vs. Arun Excello Foundations (P.) Ltd.; 86 DTR (Mad) 99 the question of law before the Hon'ble Madras High Court was "Whether in the facts and circumstances of the case, the Tribunal was right in holding that deduction under Section 80IB(10) is allowable ona prorata basis, where both commercial and residential houses have been built, when there is no such provision under the statute to grant the same?" While deciding the question in favour of assessee and upholding the order of Tribunal, the Hon'ble High Court in para 40 of the judgment observed "40. Thus, in the face of the clear provisions and going by the strict construction, one cannot read any limitation into the expression"housing project" to mean the residential project alone and that if and when the projects have mixed built-up area of commercial and residential, the question of disallowance will arise only if and when the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , at the same time, it is smaller residential units which were fulfilling all the conditions as contained in sec. 80-IB(10) and the same has not been disputed by the AO also. We have also noted down the fact that even the provision as laid down in sec. 80-IB(10) from a housing complex containing both the smaller and large residential units and since the assessee has only claimed deduction on account of smaller qualifying units by fulfilling all the conditions as laid down under section 80(IB(10), the denial of claim by the assessee is on account of rather restricted and narrow interpretation of provisions of clause (c) of sec. 80-IB(10) while coming to such conclusion, we also find support from the order of the Hon'ble supreme court in the case of Bajaj Tempo Ltd. (supra) wherein it was held that provisions should be interpreted liberally and since in the present case also, the assessee by claiming pro-rata income on qualifying units has complied with claim of the assessee was rightly allowed by the learned CIT(A) by reversing the order of the AO." 14. Similarly, the Bombay Bench of the Tribunal in the case of Ekta Housing Pvt. Ltd. in ITA No. 3649/MUM/2009 dated 20-5-2011 pertai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presumed to be more than 1500 sq. ft. the amendment brought in by the Finance (No. 2) Act, 2004 by inserting the definition of 'built up area' would not apply in the case of assessee. The project under question was approved in the year 2001 i.e. much prior to the insertion of the definition of 'built up area'. The amendment is prospective in nature and is effective from 01-04-2005. 12. The Finance (No. 2) Act, 2004 inserted the definition of 'built up area' in sub-section (14) of section 80IB. The newly inserted Clause (a) reads 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 not include the common areas shared with other residential units;" The amended provisions of section 80IB(14) are effective from 01-04-2005. 13. The issue, whether the amendment brought in by the Finance (No. 2) Act, 2004 by inserting the definition of 'built up area' in section 80IB(14) would apply on the project which had commenced prior to 2005 had come up before the Tribunal on several occasions. This issue was considered by the Mumbai Bench of the Tribunal i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and the assessee cannot be denied the exemption. However, since the area of none of the flats exceeds 1000 sq. ft. after excluding the balcony/terrace, the assessee, in our opinion, has not violated this condition. 33. Considering the totality of the facts of the case and in view of the decisions cited above, we do not find any reason why the assessee shall not be granted the benefit of deduction u/s. 80IB(10). We therefore, set aside the order of the Ld. CIT(A) and direct the AO to grant the benefit of deduction u/s.80IB(10). The grounds of appeal no. 1(i) and 1(ii) by the assessee are allowed." 14. In the case of Income Tax Officer Vs. M/s. Prime Properties (supra) the Tribunal after placing reliance on the decision rendered in the case of D.S. Kulkarni & Associates in ITA No. 17/PN/2009 decided on 31-05-2011 has held as under: "11. We have considered the rival arguments made by both the sides. There is no dispute to the fact that the project was approved prior to 1.4.2004. Therefore, the definition of built up area as per Sec. 80 IB (14)(a) which is inserted w.e.f. 1.4.2004 does not apply to projects approved prior to that date. We find the Pune Bench of the Tribunal in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to 1.4.2004 and since after excluding the balcony/terrace, the total built up area of none of the flats exceeds 1500 sq. ft., therefore, respectfully following the decisions cited (Supra) we hold that the benefit of deduction u/s. 80 IB (10) cannot be denied to the assessee. In this view of the matter, we set aside the orders of the CIT(A) and direct the A.O to allow the benefit of deduction u/s. 80 IB (10) claimed by the assessee." 15. Thus, the issue whether the definition of 'built up area' as defined u/s. 80IB(10) is to be applied in case of projects approved prior to 01- 04-2005 is no more res-integra. In view of the decisions of Co-ordinate Bench on the issue, we hold that prior to the insertion of definition of 'built up area' by the Finance (No. 2) Act, 2004 w.e.f. 01-04-2005, projections, balconies and open terrace cannot be considered as part of the 'built up area' of the residential unit. The newly inserted definition of 'built up area' would be applicable only on the projects which are approved/sanctioned after 01-04-2005. In view of the facts of the case and various decisions discussed above, we allow the cross objections by the assessee. 16. In the result, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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