2013 (11) TMI 465 - AT - Income Tax

Disallowance of deduction u/s 80IB of the Income Tax Act - Built up area of few residential units exceeded 1500 sq.ft. - According to A.O. the area of the garden should be included in total built up area and if same is included the built up area of two flats exceed 1500 sq.ft. Condition laid down in section 80IB(10) has not been complied Held that - Assessee has violated the size limit of two flats because garden area was attached to the flats and was not located on the ground floor but on the podium level and podium was constructed like any other part of the building using cement concrete steel etc. and was very much built up. Garden area was well demarcated and had clear boundaries. Garden was attached to the flats and was not open for others to use. Furthermore the garden area has been sold the buyers at price just like terrace Decided against the Assessee. Deduction u/s 80IB(10) to be allowed on proportionate basis in respect of units whose built up area is less within prescribed limit Assessee contended that as per section 80IB(10) there is no condition that all units in the housing project should have the built up area of less than 1500 sq.ft. Even if built up area of some of the units exceed 1500 sq.ft. deduction is to be allowed in respect of those units whose built up area is less than 1500 sq.ft. - - Held that - Held that - Reliance has been placed upon the decision in various cases s.a. Rohan Homes 2013 (10) TMI 758 - ITAT PUNE wherein it has been held that prorata deduction is to be allowed Also as per ITAT Kolkata Bench in its decision in the case of Brigade Enterprises 2008 (8) TMI 453 - ITAT BANGALORE-A it has been held that deduction u/s.80IB(10) was to be allowed on prorata basis with reference to qualifying residential units and assessee would not be denied claim for deduction u/s.80IB(10) if some of its residential units are of built up area exceeding prescribed limit in clause (c) of section 80IB(10) of the Act In view of the above decisions in the present case it is held that whatever portion completed by the assessee which satisfies the conditions prescribed u/s.80IB(10) is eligible for deduction - Accordingly held that the assessee is eligible for deduction u/s.80IB(10) in respect of building No. A, C, D E and the 17 row houses Decided in favor of Assessee. Date of sanction of a project is distinguishable factor for different project - Deduction in respect of project Kumar Kruti Deduction u/s 80IB is disallowed by observing that project Kumar Kruti is a part of large project named Kumar City and as the said project was sanctioned prior to 01.04.2004 assessee should have completed the project on or prior to 31.03.2008. Secondly commercial area in Kumar City project is more than limit prescribed and since project Kumar Kruti is a part of Kumar City project the said condition has also been violated Held that - Common lay-out of the project Kumar Kruti and Kumar City project has been done on date 08.08.2003 - Project Kumar Kruti was independent project since building plan of the said project was sanctioned independently on 26.07.2006 Reliance has been placed upon the judgment in the case of Aditya Developers 2013 (3) TMI 512 - ITAT Pune - Revenue authorities were not justified in holding that project Kumar Kruti is a part of Kumar City project. Further regarding commercial area exceeded the limits prescribed u/s.80IB(10) exceeded the limits prescribed u/s.80IB(10) Held that - Project Kumar Kruti is independent of Kumar City project and there is no commercial area in project Kumar Kruti then there is no question of violating the limits of commercial area as prescribed u/s.80IB(10) with regard to deduction of claim u/s.80IB(10) in respect of project Kumar Kruti in question Dedution under the said section is allowed Decided in favor of assessee.

Summary

Issues Involved:
1. Disallowance of deduction under Section 80IB(10) for the project Kumar Shantiniketan.
2. Inclusion of garden area in the total built-up area for deduction under Section 80IB(10).
3. Proportionate deduction under Section 80IB(10) if some units exceed the prescribed built-up area.
4. Disallowance of deduction under Section 80IB(10) for the project Kumar Kruti.
5. Determination of whether Kumar Kruti is part of a larger project Kumar City.
6. Compliance with conditions under Section 80IB(10) regarding the start and completion dates and commercial area limits.

Detailed Analysis:

1. Disallowance of Deduction for Kumar Shantiniketan:
The assessee claimed a deduction under Section 80IB(10) for the project Kumar Shantiniketan, which was disallowed by the Assessing Officer (AO) on the grounds that the built-up area of two flats exceeded 1500 sq.ft. The AO included the garden area in the total built-up area, leading to the disallowance. The CIT(A) upheld this view, stating that the garden area was part of the residential unit and not open to others.

2. Inclusion of Garden Area in Built-Up Area:
The AO included the garden area in the built-up area calculation, arguing that it was constructed like any other part of the building, well-demarcated, attached to the flats, and sold at a price. The CIT(A) agreed, noting that the garden area was for the exclusive use of the flat owners and thus part of the residential unit. The Tribunal upheld this decision, agreeing that the garden area should be included in the built-up area.

3. Proportionate Deduction for Units Within Prescribed Limit:
The assessee argued that even if some units exceeded the 1500 sq.ft. limit, the deduction should be allowed on a proportionate basis for the units within the limit. The Tribunal agreed, citing several precedents, including Rohan Homes vs. ACIT and Bengal Ambuja Housing Development Ltd. vs. DCIT, which support the view that deduction should be allowed proportionately for eligible units. The Tribunal directed the AO to rework the deduction accordingly.

4. Disallowance of Deduction for Kumar Kruti:
The AO disallowed the deduction for Kumar Kruti on multiple grounds: it was part of a larger project Kumar City, the project started before 01.04.2004 and was not completed by 31.03.2008, it included commercial area exceeding the limit, and some residential units exceeded 1500 sq.ft. The CIT(A) upheld the AO's decision, noting that the assessee failed to prove that Kumar Kruti was an independent project.

5. Determination of Kumar Kruti as Part of Kumar City:
The Tribunal examined whether Kumar Kruti was an independent project or part of Kumar City. The assessee argued that Kumar Kruti had a separate building plan approved on 26.07.2006, independent of Kumar City. The Tribunal agreed, noting that the building plan, not the layout plan, determines the project's approval date. The Tribunal held that Kumar Kruti was an independent project and directed the AO to allow the deduction accordingly.

6. Compliance with Section 80IB(10) Conditions:
The AO disallowed the deduction for Kumar Kruti, stating that it did not meet the conditions of Section 80IB(10) regarding the start and completion dates and commercial area limits. The Tribunal, however, found that since Kumar Kruti was an independent project with a building plan approved on 26.07.2006, it met the conditions of Section 80IB(10). The Tribunal directed the AO to rework the deduction, excluding the units exceeding 1500 sq.ft.

Conclusion:
The Tribunal allowed the deduction under Section 80IB(10) on a proportionate basis for both projects, Kumar Shantiniketan and Kumar Kruti, directing the AO to rework the deductions accordingly. The Tribunal emphasized the distinction between layout plans and building plans, determining that Kumar Kruti was an independent project and eligible for the deduction.