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TMI Blog2019 (7) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. CIT(A) was justified in deleting the action of ld. AO denying deduction u/s.80IB(10) of the Act in respect of profit from sale of car parking space in the facts and circumstances of the case. 3. The brief facts of this issue are that the assessee company has undertaken various real estate/ housing development projects. During the year, the assessee company has shown profit derived from housing project at 375, Prince Anwar Shah Road, Kolkata - 700068 which include profit from sale of residential units and sale and rent from the commercial properties. The assessee claimed deduction u/s.80IB(10) in respect of profits derived from sale of residential units and others in the sum of Rs. 197,59,59,835 for the A.Y.2009-10 which is also supported by audit report in form 10CCB furnished along with return of income. There is no dispute as to the eligibility of deduction u/s.80IB(10) of the Act for the assessee in respect of the aforesaid housing project. (i) During the course of the assessment proceedings the appellant had submitted that car parking is part of the housing project: and cannot be separated from the housing project for allowing deduction u/s 80IB(10). However, the ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that sale of stilt parking area by the builders and promoters are illegal in the State of Maharashtra and therefore, if such sale is not permitted by law, then on what grounds it could be claimed that profits from such sales are deductible. The assessee with regard to this decision relied upon by the ld. AO stated before the ld. CIT(A) that the said decision is not relevant to the instant case for the following reasons:- "i. The decision is in respect of sale of stilt car parking in Maharashtra and is therefore in relevance to the rules and regulations' 'prevailing in Maharashtra which is substantially different from that of West Bengal, Kolkata ii. Further the Apex Court has held sale of car parking area illegal on the ground that it is a common area for the flat owners and therefore is a part and parcel of the housing project and should not be sold separately as per rules of State of Maharashtra.' iii. Thus even the Judgment referred by the learned AO contemplates car parking area as an integral part of the housing project, which is the very basis of claim of deduction of sale from car parking area u/s 80IB(10)" 3.2. Accordingly, it was argued that assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vices and facilities are also required to be provided by the developer. It has been held that the assessee is entitled for deduction u/s 80IB in respect of amount received from car parking space by the ITAT, Mumbai in DCIT , Central Circle-2;Vs Purvankara Projects Ltd. in ITA Nos. 4347to4351 for Assessment Year 2004-05 to 2008-09. It has. been held by the Hon'ble Bombay High Court in ITA Nos.: 4975/4976 and ^77 of 2010 in the case of Purvankara Projects Ltd. as under:- "The finding of facts recorded by the CIT(A) and approved by ITAT is that, In present case , it is not in dispute that the assessee is entitled to deduction u/s.80IB. The only dispute is whether the assessee is entitled to deduction in respect of amount received towards car parking space. The finding of fact recorded by the CIT(A) and approved by ITAT is that the 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 par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hence not eligible for deduction u/s 80IB is not tenable for the reason that, issues dealt with in recent Supreme Court judgment in the case of Nahalchand Laloochand Private Limited 'Vs Panchali Copprative Housing Society Ltd. in civil appeal No. 2544 of 2010, are not similar to 'the case of the appellant. In that case promoters wanted to sell stilt parking area as garage to others, whereas in instant case car parking area are allotted to flat owners only to park their cars.: Also in the order dated 7.11.2012 which was Tendered much later than the order passed by Hon'ble Supreme Court, the ITAT, Mumbai in Purvankara Projects Ltd. VS DCIT , Central Circle-2 ITA Nos. 4347 to 4351 for Assessment Year 2004-05 to 2008-09 has held that the assessee is entitled for deduction u/s 80IB in respect of amount received from car parking Respectfully following the" judgment of Hon'ble Bombay High Court the case of Purvankara Projects Limited and of ITAT in case of Vaman Estate it is held that the AO was not right in law-deduction u/s SOIB(IO) on income from sale of car Parking. Hence the AO is directed to grant deduction of Rs. 11,75,76,285/-u/s.80IB(10) in respect of income fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l is as to whether the ld. CIT(A) was justified in not allowing deduction of Rs. 4,05,48,257/- being profit from sale of residential units with utility rooms allegedly having correct built up area exceeding 1500 sq.ft. while computing the deduction u/s.80IB (10) of the Act. 16. The brief facts of this issue are that the assessee sold residential flats and utility rooms in the housing project and receipts from profit from sale of flats and utility rooms were claimed to be eligible for deduction u/s.80IB(10) of the Act. The ld. AO asked the assessee to furnish the details of sales with bifurcation of unit wise area of flats and utility rooms sold. In response, the details were furnished by the assessee company. From the perusal of the details, the ld. AO observed that in respect of 73 parties, the assessee had sold flats along with utility rooms wherein the total area had exceeded the limit of 1500 sq. ft which had resulted in violation of provisions of Section 80IB(10)(c) of the Act. Accordingly, the ld. AO sought to disallow the deduction u/s.80IB(10) of the Act in respect of said 73 parties in the housing project. The ld. AO also observed that the total receipts from such sale o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80 IB(10)(c) will apply to the total combined area of utility room and the flat. Further the argument of the appellant that Separate conveyance deed were executed in regard to flat3;:and utility rooms can 'at best be described as an attempt to avoid tax' liability by deliberately keeping the flat area within stipulated limit of 1500 sq ft. Since the total area has exceeded the limit of 1500 square feet,; the deduction under section 80IB(10)cannot be allowed in respect thereof I therefore, confirm the disallowance of the claim of Rs. 4,05,48,257/- under section 80IB(10). The ground no. 3 is, therefore, dismissed. 18. Aggrieved the assessee is in appeal before us. 19. We have heard rival submissions. We find that the ld. DR vehemently argued the intention behind introduction of grant of deduction u/s.80IB(10) of the Act that by stating that the same is meant for middle class under affordable housing category and that the said deduction should be strictly construed. The utility rooms in the instant case is nothing but servant quarters. The ld. DR vehemently argued that whether the servant quarter is separated from the main residential unit or attached together is of no re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch such individual is the karta (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta." 19.3. Ld. AR placed on record the copy of allotment letter of utility rooms (sample copies) in pages 74 to 76 of the supplementary paper book. We find that the ld. DR placed reliance on the decision of Hon'ble Karnataka High Court in the case of CIT & Anr. Vs. Raghavendra Constructions reported in 354 ITR 194 (Kar). The operative portion thereon is reproduced hereunder: "8. Therefore, the intention is clear. In calculating the built-up area it is only the inner measurements of the residential unit on the floor level, which have to be taken into consideration. If there are any projections and balconies and if it exclusively belongs to the residential units, then, that also has to be taken into consideration for deciding the built-up area. However, if the said residential unit is provided the facility of common areashared with other residential units such common areas have to be excluded while computing the built-up area. The language employed in defining the built-up area as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record by the ld. DR of Hon'ble Karnataka High Court supra clearly supports our understanding of the expression "built up area" clearly defined in Section 80IB(10)(14) of the Act to include the inner measurements of all the residential units on the floor level. It is not in dispute that by taking into account inner measurements of the 73 residential units plus their respective servant quarters, the total expenditure exceeded 1500 sq. ft thereby leading to violation of 80IB (10(c) of the Act. Hence, we hold that the ld. AO had rightly denied deduction u/s.80IB(10) of the Act to the extent of utility rooms (servant quarters) in the sum of Rs. 4,05,48,257/-. Accordingly, ground No.1 raised by the assessee is dismissed. 20. Ground No.2 raised by the assessee for A.Y.2009-10 is general in nature and does not require any specific adjudication. 21. In the result, the appeal of the assessee in ITA No. 1543/Kol/2014 is dismissed. 22. Let us take up assessee appeal for the A.Y.2010-11 in ITA No.1544/Kol/2014. The first issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in not allowing deduction u/s.80IB(10) of the Act in the sum of Rs. 143,05,014/- on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was inspected on 18/02/2013 but entry was denied into any of the flats for making the measurement. Accordingly, the Valuation Officer had managed to measure the terrace floor of the relevant flat types from which it is not possible to calculate the exact built up area of any typical flat. It was also pointed out that the Valuation Officer while calculating the built up area from terrace had also included the area of terrace garden which is incorrect. To summarize, the assessee pleaded before the ld. CIT(A) that the valuation report to the Divisional Valuation Officer cannot be relied upon for the following reasons:- (i) Physical verification was not carried out properly on the relevant flats in respect of its disallowance has been made. (ii) The Valuation Officer has himself stated that exact built up area could not be calculated from the terrace. (iii) Terrace garden area has also been included in the calculation of built up area of rooms. 27. The ld. CIT(A) dismissed the entire contentions of the assessee on the ground that the assessee did not dispute the report of DVO at the assessment stage and hence, the same cannot be disputed by him at the first appellate stage. 28. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duced herein below:- " 2.65 Plinth Area-The built up covered area measured at the floor level of the basement or any storey. 2.26 Covered Area- Ground area covered by building immediately above the plinth level. The area covered by the following in the open spaces is excluded from covered area. a) Garden, rockery, well and well structures, plant nursery, waterpool, swimming pool (if uncovered), platform round a tree, tank, fountain, bench, CHABUTRA with open top and unenclosed on sides by walls and the like; b) Drainage culvert, conduit, catch-pit, gully pit, chamber, gutter and the like; c) Compound wall, gate, unstoreyed porch and portico, canopy, slide, swing, uncovered staircase, ramps areas covered by CHHAJJA and the like; and d) Watchmen's booth, plumphouse, garbage shaft, electric cabin or substations, and such other utility structures meant for the services of the building under consideration. NOTE- For the purpose of this Part, covered area equals the plot area minus the area due for open spaces." 4.2.1. We find that the Learned AO during the course of assessment proceedings asked the assessee inter alia to submit before him the copies of brochure issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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. Hence it could be concluded that the open terrace is not covered within the meaning of built up area as it is open to sky and would not be part of the inner measurement of the residential floor at any floor level. Reliance in this regard is made on the decision of the co-ordinate bench of Ahmedabad Tribunal in the case of Amaltas Associates vs ITO reported in 131 ITD 142 (AHD.) wherein it was held that the definition of built up area is inclusive of balcony but not open terrace. It further held that DVO has considered the open terrace as analogous to balcony / verandah without any basis. Therefore, it took the view that the authorities below were not justified in taking the open terrace as balcony / verandah rejecting the claim of the assessee. 4.2.4. Reliance in this regard is placed on the decision of Hon'ble Madras High Court in the case of CIT vs M/s Mahalakshmi Housing in Tax Case (Appeal) Nos. 583 & 584 of 2011 and 316 & 317 of 2012 dated 2.11.2012, wherein the questions raised before their L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R OF INCOME TAX dated 19.10.2012. Hence, the appeals filed by the Revenue viz., T.C. (A). Nos. 583 and 584 of 2011 stands dismissed and this portion of the Tribunal's order stands confirmed. The assessee's appeals in T.C.Nos.316 and 317 of 2012 stand allowed, holding that the terrace area . No costs. 4.2.5. Reliance is also placed on the decision of the co-ordinate bench decision of Pune Tribunal in the case of Shri Naresh T. Wadhwani vs DCIT in ITA No.s 18, 19 & 20 /PN/2013 for Asst Years 2007-08,2008- 09 & 2009-10 dated 28.10.2014, wherein it was held that :- " 18. A bare perusal of the aforesaid question of law before the Hon'ble Madras High Court would reveal that the issue related to whether open space of the terrace would fall within the expression 'built-up area'. The facts before the Hon'ble High Court were that assessee had constructed various apartment blocks and each block had 64 apartments. The apartments located at first to sixth floor were of areas less than 1500 sq.ft.. However, the flats located on the 7th floor had the advantage of exclusive open terrace. While considering the relief u/s 801B(10) of the Act, the Assessing Officer took in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rules and regulations of the local authority and concluded that an open terrace could not be equated to a 'projection' or 'balcony' referred to in section 80IB(14)(a) of the Act. 21. Notably, the Hon'ble High Court also considered an argument from the side of the Revenue to the effect that the sale of the area of open terrace by the assessee to the respective purchaser would justify the inclusion of such terrace area into the calculation of 'built-up area'. Before us also, the learned CIT-DR has raised the said issue though she has fairly conceded that such a finding was not emerging from the orders of the lower authorities. Be that as it may, the Hon'ble High Court has noted and dealt with the said argument in the following words ;- '29. Thus, in the face of terrace being an open area, not being a projection and hence, not included in the plinth area, the question herein is as to whether the Tribunal is justified in confirming the order of assessment to include the terrace area into the built-up area solely by reason of the fact that the assessee had sold it to purchasers of the 7th floor as a private terrace. 30. We do not think, the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd if the same is excluded , then the resultant built up area is well within the 1500 sq.ft limit prescribed in the statute and hence rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order." 32. However, we direct the ld. 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 ld. AO to decide the same in the light of the aforesaid decision and in light of the aforesaid directions. Accordingly, the ground No.1 raised by the assessee is allowed for statistical purposes for A.Y.2010-11. 33. The next issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in upholding the action of the ld. AO in not allowing claim of write off of sundry balances in the sum of Rs. 60,03,282/- in the facts and circumstances of the case. 34. The brief facts of this issue are that the during the year, the assessee had written off of certain sundry balances of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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