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2017 (3) TMI 1790 - AT - Income TaxDeduction u/s 80IB(10) - proof of construction - permission given by the PMC for construction of proposed building at the site of the assessee - whether assessee had received the permission to construct the building prior to 01.10.1998 ? - HELD THAT:- Where the assessee has got permission on 19.12.1998 to construct the building, then the assessee has fulfilled the basic conditions laid down in section 80IB(10) of the Act in order to avail the benefits of the said section; since the deduction under the said section is available to such projects which commenced construction on or after 01.10.1998. The previous commencement certificates were in respect of layout plan of the said project and are at variance with the commencement certificate issued for construction of building and in such circumstances, it could not be held that the assessee had received the permission to construct the building prior to 01.10.1998 and hence, was not eligible for claiming the deduction under section 80IB(10). We find no merit in the orders of authorities below in this regard. We hold that where the permission has been granted to the assessee for the first time for constructing the building vide commencement certificate No.2098, dated 19.12.1998, the assessee fulfills the basic conditions of starting the project on or after 01.10.1998 and hence, is eligible to claim the deduction u/s 80IB(10) Assessee had incurred certain expenses which are on account of several activities including payment of land development charges, Architect fees, MSEB, bore well drilling charges, designing and development of press advertisements and the advertisement charges, designing of brochures and also purchase of GI sheets, bricks, water storage tanks, etc and also invitation cards for Bhoomi Puja - Activity to construct would only happen once the permission is received by the assessee i.e. building plan commencement certificate. The authorities below have also referred to certain communication of the Architect that the development had started prior to 1998 and the site visits on 01.08.1997 and 25.08.1997 which as per authorities below is the factum of commencement in addition to excavation and construction of roads prior to 01.04.1998. The above said stand of authorities below gets demolished by the revised layout plan issued by the PMC on 24.06.1998 which admittedly, is an approval for layout of the land. The said commencement certificate clearly mentions that it is valid for a period of one year, under which all the terms and conditions mentioned in the commencement certificate have to be complied with by the assessee. It also mentions that earlier sanction granted if any, is cancelled meaning thereby that even if certain sanction was given by the PMC, the same stands cancelled by the revised layout commencement certificate issued on 24.06.1998. Accordingly, the stand of authorities below in respect of activities carried on prior to that date does not stand. We have already held in the paras hereinabove that there is distinction between the layout sanction and the building sanctioned plan and in the case of assessee, commencement certificate dated 19.12.1998 is the sanction granted by the local authority to construct the building and the date of start of project is dated 19.12.1998, which falls within pre-conditions laid down in section 80IB(10) of the Act and hence, the assessee is eligible to claim the deduction. Whether the assessee has deviated from the sanctioned building plans and had constructed the flats having area more than 1500 sq.ft. or change the usage of sanctioned flats from the residential to commercial? - Assessee is entitled to claim the deduction in respect of such flats which fulfill the conditions laid down in section 80IB(10) of the Act i.e. having residential use and having total area of 1500 sq.ft. within boundaries of the flats. Merely because the assessee has merged flats but in case the area of merged flats is within prescribed limit of 1500 sq.ft., then such flats are eligible for deduction under section 80IB(10) of the Act and in this regard of merger of flats, there is mechanism provided by the municipal authorities, wherein suitable fines and fees are levied after the assessee submits the record plans. Even if the assessee has made extra construction than the approval received from the local authority, then such extra construction has to be looked into by the municipal authorities and the Income Tax authorities are to ensure that the conditions laid down under section 80IB(10) of the Act are fulfilled in respect of such flats for which the said deduction is to be allowed. Where the area of flat is more than 1500 sq.ft., the assessee is not entitled to the deduction, having not fulfilled the conditions of said section. In this regard, we place reliance on the ratio laid down in Bangalore Bench of Tribunal in ITO Vs. Mahaveer Calyx [2012 (11) TMI 508 - ITAT BANGALORE] Usage i.e. extra commercial usage as against sanctioned commercial usage - Again this facet is to be looked into by State Authorities. The assessee before us has not claimed deduction on account of units of commercial usage. Area of flat - As per the provisions of the Statute in the relevant years, it is the area within four boundaries which has to be taken into consideration and if the same is up to 1500 sq.ft., then the assessee is entitled to avail the deduction, in case it exceeds 1500 sq.ft., then the deduction to such units can be denied. The denial of deduction under section 80IB(10) of the Act is unit-wise. In other words, the assessee is entitled to prorata deduction under section 80IB(10) of the Act in respect of all those residential units which fulfill the conditions laid down in the section of having built up area of 1500 sq.ft. Accordingly, the Assessing Officer is directed to verify the claim of assessee through the DVO and after affording reasonable opportunity of hearing to the assessee. The Assessing Officer is also directed to allow prorata deduction under section 80IB(10) of the Act to the assessee in respect of such units which fulfill the conditions. All the other units which do not fulfill the conditions of area of 1500 sq.ft. are not entitled to the said deduction. We hold so. The tenements in B1 and C3 building admittedly, have not fulfilled the conditions and are not eligible for deduction. Accordingly, grounds of appeal raised by the assessee vis-à-vis deduction claimed under section 80IB(10) of the Act are partly allowed.
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