2008 (5) TMI 333 - ITAT NAGPUR

Interpretation of Statutes - Eligibility of deduction u/s 80I - developing housing project - clubbed various plots of different sizes - show that land area was more than 1 acre - pro rata deduction in respect of dwelling units having built-up area less than 1,500 sq. ft. - each layout separately would not be adverse to claim deduction u/s. 80-IB(10) - non-fulfilment of conditions prescribed in s. 80-IB(10) - Whether the assessee has fulfilled the conditions prescribed by s. 80-IB(10)?

Whether the project is on the size of a plot of land which has a minimum area of one acre? - HELD THAT:- As per the assessee, the project is developed on the area of 2.06 acres, while as per the AO, the project is developed in an area of below one acre. In the paper book, the assessee has furnished the certificate from the NIT which is the local authority entitled to approve the housing project.

It is evident that the assessee has developed a housing project scheme. In respect of such housing scheme, the assessee got the approval from NIT on six different dates ranging between 11th Jan., 2002 to 15th May, 2002. The area of land covered under each approval was below 4,000 sq. mtrs. but the total area covered together in all the six approvals was 8,370 sq. mtrs. which is more than two acres.

Whether by six different approvals, the assessee has developed six different housing projects or it was in pursuance to development of one housing project - From the letter of NIT, it is evident that there was only one housing project for which multiple sanctions were granted, as per the zoning of the plot and access road. This contention of the assessee is further fortified by the brochure circulated by the assessee for the sale of the plot. The copy of the brochure is placed at the assessee's paper book.

From the brochure, it is evident that during the year under consideration the assessee developed only one housing project. Merely because for such one project, the approval was taken from NIT more than once, it cannot be said that the assessee developed six different housing projects. In view of totality of the facts, we agree with the finding of the CIT(A) that during the accounting year, relevant to assessment year under consideration, assessee developed one housing project, which was on the area exceeding one acre.

Whether the built-up area of the residential unit constructed by the assessee exceeded 1,500 sq. ft. - Applying the ratio of the decision of the Hon'ble apex Court in the case of Virtual Soft Systems Ltd. vs. CIT [2007 (2) TMI 147 - SUPREME COURT], we find that sub-cl. (a) of s. 80-IB(14) has been made effective by the legislature from 1st April, 2005. There is no mention in the Act that the insertion of the definition of the built-up area as above is clarificatory or declaratory. Thus, relying up the decision of the Hon'ble apex Court hold that the definition would be applicable from 1st April, 2005 i.e., for the AY 2005-06 onwards.

In our opinion. in the year under consideration, when there is no definition of the built-up area under the IT Act, the definition of the same in the Development Control Regulation, 2000, for Nagpur City would be applicable. However, we find that the relevant facts have not been examined in the light of the above Regulation.

We, therefore, direct the AO to examine whether in view of Development Control Regulation, 2000 area of the balcony is to be included in built-up area or not. Thereafter, if the built-up area of any residential unit does not exceed 1,500 sq. ft., then the entire deduction claimed under s. 80-IB(10) would be allowed. However, if the area of the some of the residential units exceeds 1,500 sq. ft., the question would be whether the entire deduction under s. 80-IB is to be denied or proportionate deduction is to be allowed.

It would be fair and reasonable to allow the deduction on proportionate basis i.e. on the profit derived from the construction of the residential unit which has a built-up area of less than 1,500 sq. ft. i.e. the limit prescribed under s. 80-IB(10). thus, we direct the AO that if he finds that the built-up area of some of the residential units is exceeding 1,500 sq. ft., he will allow the proportionate deduction under s. 80-IB(10). Accordingly, the appeal of the Revenue is dismissed and cross-objection of the assessee is deemed to be partly allowed as above.

In the result, the appeal by the Revenue is dismissed and the cross-objection by the assessee is deemed to be partly allowed for statistical purposes.