TMI Blog2009 (8) TMI 953X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the prescribed area of 1500 sft. The only unit measured by the DVO in the Redwood project does not fit into the definition of built-up area as defined in the section. He argued that it is pertinent to note that the inspection was made only after the passing of the assessment order. The DVO has considered the total area of the duplex apartment and not at the floor level which is required to be considered for the purposes of section 80-IB(14)(a). We are of the view that the appeal by the assessee is to be allowed to the extent of the flats the ITA.1192/B/08 built-up area of the flat is not more than 1500 sft. We agree with the submission of the learned representative for the assessee that while considering the built up area of 1500 sft for the purpose of exemption u/s.80IB(10), the mezzanine floor and common areas are to be excluded. The AO is directed accordingly. We hold that in respect of the pent houses the built-up area of which is more than 1500 sft, they may be excluded for exemption. However, in the light of the decision of the Special Bench in the case of Brahma Associates [ 2009 (4) TMI 215 - ITAT PUNE] , merely because some flats are larger than 1500 sft, the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion method and the assessee claimed deduction u/s.80IB(10) amounting to Rs.2,02,08,690/- being 100% of the profit in respect of Redwood project. The deduction was claimed by the assessee on the ground that each dwelling units/flats constructed in Redwood project was less than 1500 sft per unit. There was a survey action u/s.133A on 8.2.07 which covered the project sites as well. It was noted that the project was constructed by the assessee on joint development basis and the land was owned by Shivaprasad Reddy, Siddharam Reddy and Anila Reddy, who got 40 flats in terms of the joint development agreement. Shivaprasad Reddy was summoned and examined on oath. He stated that out of the four flats given to him the area of one of the flats was 2350 sft while the area of other flat was 3800 sft. He produced a copy of allotment letter from SJR builders dt.6.12.06 which indicated that the flats No. M-105 in 'M' Block consisted of an area of 3738 sft and M- 408 consisted of 2354 sft. The Assessing Officer was left with no doubt that the area of the same unit in Redwood project was above 1500 sft and, therefore, he came to the conclusion that the assessee was not eligible for deduction u/s.80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions under the relevant Act. It was contended that Section 80IB(10) is provided to address housing the requirements in the country. The assessee satisfies all the three conditions excepting a few flats like M-105, M-401 to 403 and M-405 to 407, which are constructed with built-up area exceeding the maximum permissible of 1500 sft. Hence, the assessee contended that deduction should be allowed in proportion in respect of the flats which conforms to the pre conditions. For the proposition that the ITA.1192/B/08 deduction u/s.80IB(10) cannot be denied if a housing complex contains both smaller and larger units, the assessee relied on the ITAT, Kolkata Bench decision in ITA.1735/Kol/05, dt.August, 2007 in the case of ACIT v. Bengal Ambuja Housing Development Ltd., and also the decision of the ITAT, Chennai in the case of Arun Excello Foundations P. Ltd., v. ACIT in ITA Nos.2090 and 2091/Mad/06, dt.16.2.07, for the proposition that benefit should be given on pro-rata basis. The assessee relied on the decision of the Supreme Court in the case of Bajaj Tempo reported in 196 ITR 188, for the proposition that the beneficial provisions should be interpreted liberally. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80IB(10). He further held, conceding the assessee's claim of proportional deduction in the light of the foregoing analysis of the issue, would frustrate the objectives of section 80IB(10) and, therefore, he held that the assessee is not entitled for deduction u/s.80IB(10). The assessee is in appeal before the Tribunal. 6. The learned representative for the assessee submitted that the claim of the assessee for the benefit of section 80IB(10) was rejected by the revenue authorities on the ground that the built-up area of some of the flats were more than 1500 sft i.e., the maximum prescribed, to avail the benefit u/s.80IB(10)(c) for the Metros other than Delhi and Mumbai. The assessee's representative submitted that the revenue authorities are not fully correct on the ground that the excess area of the flat includes, even according to the revenue authorities, the super-built-up area and includes the common area. The learned representative submitted that this notion of the revenue authorities is incorrect and he specifically brought our attention to section 80IB(10)(a) which was inserted by the Finance Act (No.2), 2004, w.e.f.1.4.2005, which reads as under : ITA.1192/B/08 (14) For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he occupants themselves making certain changes which is not attributable to the assessee at all. He further submitted that while sanctioning the plan it was evident that the assessee never envisaged any unit with a built-up area of more than ITA.1192/B/08 1500 sft. The fact that the occupancy certificate was issued in the month of June, 2006 indicates that the assessee had adhered to the plan. A perusal of the occupancy certificate shows that it relates to 152 residential apartments of which 38 are duplex units. The total area of the duplex units may exceed 1500 sft. The total area of each of the duplex apartment may exceed 1500 sft but the area of such apartment when viewed within the meaning of the definition of "built- up area within the ambit of section 80IB(14)(A) do not exceed 1500 sft. Actually the DVO has not physically measured any of the apartment discussed in the assessment order. The DVO's conclusion that each of the unit exceeds 1500 sft is based on the assumption that they are pend houses and hence must have exceeded the prescribed area of 1500 sft. The only unit measured by the DVO in the Redwood project does not fit into the definition of built-up area as defined i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Bangalore Bench of the Tribunal in the case of Brigade Enterprises P. Ltd., in ITA No.1198/Bang/07, dt.29.8.2008, particularly to para 5.1. He also relied on the decision of the Special Bench of the ITAT, Pune in the case of Brahma Associates and Others in ITA.1417/PN/06, dt.6.4.2009, wherein the Tribunal held that the tax incentives by way of deduction u/s.80IB(10) is predominantly for the purpose augmenting affordable dwelling units and it must be interpreted in that light only. The assessee's representative submitted that profits from units are to be allowed on the basis of method of accounting employed by the assessee. Accounting principles mandate recognition of profits from each unit separately and deduction should be allowed as such. 9. In support of the above, the assessee's representative submitted that the provisions relating to exemption, allowance and deduction, rebate or relief should be interpreted liberally and broadly. For the ITA.1192/B/08 above proposition he relied on the case of Union of India and Others v. M/s. Wood Papers Ltd., and another (AIR 1991 (SC) 2049). The assessee's representative particularly relied on the following observation : " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of old assets. In the present case, the profits attributable to the eligible residential units out of 152 residential units should be allowed as a deduction. ITA.1192/B/08 Page - 16 10. The assessee's representative further relied on the decision of the Chennai Tribunal in the case of Arun Excello Foundations P. Ltd., (supra) and submitted that deduction u/s.80IB(10) on the residential units constructed be given on pro rata basis. The above proposition was accepted by the Tribunal in this case. Again the assessee's representative referred to the decision of the Calcutta Bench of the Tribunal in Bengal Ambuja Housing Development Ltd., in ITA.1735/Kol/2005, wherein the Tribunal was seized of a case involving a project consisting of 261 residential units wherein the individual unit sizes varied between 800 sft to 3000 sft. Deduction u/s.80IB(10) was claimed with reference to profit attributable to the built-up area, which was occupied by the residential units having individual flat size of less than 1500 sft. The assessee's representative further submitted that in the case of the assessee if there is a 10% excess as far as a flat is concerned, it should be considered as in conformi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ject and the Tribunal held that the assessee was not entitled or exemption merely because the assessee's site fell within the residential zone. He further relied upon the decision of the Tribunal, Chennai Bench in the case of ACIT, Central Circle v. Chitra Construction P. Ltd., in IT(SS)A. No.206/Mds/2006, dt.28.3.2008. In this case, the Tribunal held that the mandate of section 80IB(10) is that the exemption in this regard is to be provided to the project in which the residential unit has a maximum built-up area of 1,500 sft. Then, if there is a variation in this condition in any of the residential units, there is a clear violation of the provisions of the Act and the claim made by the assessee is to be disallowed. 12. Considering the rival submissions, we are of the view that the appeal by the assessee is to be allowed to the extent of the flats the ITA.1192/B/08 built-up area of the flat is not more than 1500 sft. We agree with the submission of the learned representative for the assessee that while considering the built0up area of 1500 sft for the purpose of exemption u/s.80IB(10), the mezzanine floor and common areas are to be excluded. The Assessing Officer is directed acc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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