TMI Blog2012 (8) TMI 84X X X X Extracts X X X X X X X X Extracts X X X X ..... flats merges it into a larger flat, the claimed deduction to the assessee cannot be denied on this basis - A.O has fully applied his mind before allowing the deduction - assessment order in question can not be held as erroneous and prejudicial to the interest of the revenue - grounds questioning the validity of the revisional order in question are thus allowed in favour of the assessee Disallowance of deduction claimed u/s. 80IB(10) – alleged that area of the project is less than 1 acre - explanation of the assessee that another 5 Are of land was purchased subsequently from the same owners which could be included in the calculation of area of the plot - A.O has denied the deduction is the alleged merger of 4 flats deviating from approved plans – Held that:- Merger of flats after purchase by the owners thereof to make it into a larger flat for their own convenience will not be a cause for denial of claimed deduction especially when an undisputed fact that each of those flats does not exceed the prescribed area limit 1500 Sq.ft. – deduction is allowed - appeal is allowed Disallowance of deduction - authorities below have denied the claimed deduction u/s. 80IB(10) of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found the assessment order as erroneous as well as prejudicial to the interest of the Revenue on the following reasons : 1) The area of the project is less than 1 acre. 2) As per Sale Agreement of row house, the saleable area mentioned is more than 1500 Sq.ft, similar position is there in unit Nos. 2, 8 5. 3) In A.Y. 2005-06, the I.T.O. in its order passed u/s. 143(3) has denied the deduction u/s. 80 IB (10) to the assessee on the grounds that (No. 1, the area of the plot is less than 1 acre; (2) row house in building No. D is having built up area exceeding 1500 Sq.ft); and No. 4) There are flats which were merged together and modification is not as per approved plans. 3. Being not satisfied with the explanation of the assessee, the CIT while holding that the assessment order in question is erroneous as well as prejudicial to the interest of revenue has directed the A.O to withdraw the deduction granted u/s. 80 IB (10) of Rs. 47,95,506/- from the assessed income. 4. The Ld. A.R. while reiterating the contentions made before the authorities below, submitted that the assessee had commenced the construction of the project in the F.Y. 2003-04. The original lay out plan wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted further that the project consists of 37 residential flats and 11 row houses, out of which, the built up area of the none of the flats and row house exceeds 1500 Sq. ft.. The built up area of row house No. 11C in Building D does not exceed 1500 Sq.ft. area. The residential units has a maximum built up area of 1500 Sq.ft. The built up area of the shops and other commercial establishments included in the housing project does not exceed 5% of the aggregate built up area of the housing project or 2000 Sq.ft., whichever is less. The Ld. A.R. submitted further that built up area for the purpose of the Section as defined in Clause (a) to Sub-section 14 of Section 80IB means the inner measurement of the residential unit at the floor level, including the projections and balconies as increased by thickness of the walls but does not include the common areas shared with other residential units. 6. The Ld. A.R. submitted further that in the sale agreement of row house, the saleable area mentioned is more than 1500 Sq.ft. because it includes area of open land/garden. If that area is excluded, then area of row house is less than 1500 Sq.ft. As per the provisions of Section 80IB(10), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent verification of the claim. He failed to appreciate that approval by the PMC was granted on the plan having area of less than 1 acre of land. No approval for 5 Are land used for road was granted by the PMC. This road was due to arrangement with neighbors. The story of acquisition of 5 Are land for road purpose is nothing but an after-thought by assessee as the agreement for acquisition of land is dated 20th March 2004 and no amount of consideration for the acquisition has been mentioned in the agreement. In this regard, the Ld. D.R. referred page No. 5 6 of the paper book i.e. part of the agreement. The Ld. D.R. submitted further that the A.O is not competent to verify the area on his own being not a technical person. He has not mentioned about taking assistance of any technical person. It is his wrong assumption of fact by the A.O that the area of land of the project was 1 acre. He failed to appreciate that the approval by the PMC was granted to the plan for less than 1 acre area. Since it is a case of wrong assumption of fact by the A.O, the assessment order is erroneous. He placed reliance on the following decisions : i) K.A. Ramaswamy Chettiar Ors.Vs. CIT,220 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o a society is the responsibility of assessee and the assessee by a separate agreement dt. 20th March 2004 had acquired 5 Are of land for the road purpose and it is the only road available to the society for ingress and outgress. It was submitted that if the land of 5 Are is included in the land area shown in the plan, the total area exceeds 1 acre of land. His further contention remained that in view of the decision of Mumbai Bench of the Tribunal in the case of Haware Engineers and Builders (P) Ltd. v. ACIT (Supra) (holding that deduction u/s. 80 IB(10) denied on the ground that additional plot was a distinct plot was neither actually correct nor sustainable in law) the area of 5 Are will be included for computing the total area of the land. The contention of the Ld. D.R. remained that the acquisition of the said area of 5 Are for the purpose of road to the society is an after-thought since in the agreement with the owner of the said land, amount in consideration agreed for the transaction of land has not been mentioned and the land is stated to be shared with neighbours. The Ld CIT, besides noting this fact has also noted that there was no registered document for acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less than 1 acre i.e. 4046.82 Sq. Mtrs., with subsequent allotment of adjacent plot measuring 48.13 Sq.mtr. did not make good the deficiency in eligibility for entitlement to deduction u/s. 80 IB(10) as it was allotted for purpose of playing ground/green area and nondevelopment/ construction was permitted therein and that additional plot was actually a separate plot distinct from original plot. On appeal, the Commissioner(Appeals) confirmed the disallowance on the ground that the assessee had tried to get its irregular claim of deduction u/s. 80 IB(10) regularized through allotment of additional plot. After detailed discussion on the issue, the Bombay Bench of the Tribunal on the observation of the Commissioner (Appeals) to the effect that it was manifestly clear that the assessee had tried to get its claim of deduction u/s. 80IB(10) regularized through the allotment of additional plot and that it was not the intention of the legislature that the housing projects which have already been completed on a smaller plot will also be eligible for deduction u/s. 80IB(10) if subsequently it possesses additional adjacent land to make the total area more than 1 acre. The Tribunal held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has never been any relevant criteria for allowing or not allowing deduction u/s. 80IB(10), what is necessary is that assessee should have complete control, dominions or right to carry on project as sanctioned by local authority. Department in the present case before us has not disputed the claim of the assessee that there is a dominion of the assessee developer over the land in as much as the possession of land is given to the assessee and the land has been marked and used as road meant for the society. The Pune Bench of the Tribunal in the case of Bunty Builders v/s.ITO (Supra) has held that CBDT Circular in (2005) 276 ITR (ST.) 170 gives a clear indication that though the Sec. 80IB(10) do not specifically provide for the development plan roads or grant of other facilities etc., in a housing project but the same should conform to the project plan and approved by the local authority. It was held further that housing project constitute development plan, roads and grant of other facilities, therefore, those areas should exist within the prescribed limits and to be considered as a part and parcel of the project. There is no dispute in the case before us that after addition of 5 Are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rea of the said row huse is 518.5 Sq.ft. whereas the surveyor has mentioned in his report the area as 783.21 Sq.ft., hence the difference of 264.79 Sq.ft (store/gym. Room area) will be reduced from total built up area shown as 783.21 sq.ft. which comes to 518.42 Sq.ft. and first floor area 890.29 sq.ft., thus total comes to 1408.79 Sq.ft. We do not find reasons to disbelieve this explanation of the assessee as the same has also been verified by the A.O in his personal visit of the site. Personal visit of the site by the A.O has not been denied by the ld CIT nor in absence of substantive rebuttal of above explanation of the assessee it can be alleged that A.O has wrongly accepted lesser area without verification. So far as merger of flats and thereby exceeding the prescribed limit of 1500 Sq.ft. taken as a basis for denial of the deduction in the A.Y. 2005-06 by the I.T.O is concerned, there is no substance since it is undisputed fact that each flat was within the prescribed limit of 1500 Sq.ft. area and if after purchasing of 2 flats owner(s) of flats merges it into a larger flat, the claimed deduction to the assessee cannot be denied on this basis. In view of the above discussion, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 98,66,499/- claimed u/s. 80IB(10) of the Income Tax Act 1961 made by the A.O without appreciating the facts of the case in proper perspective. 16. We have already discussed the general facts of the case hereinabove while adjudicating the ITA No. 629/PN/2009. During the year, the A.O denied the claimed deduction u/s. 80IB(10) of the Act on the basis that in the lay out plan sanctioned by the PMC on 5.12.2002, the total area of plot has been shown 3995.34 Sq. Mtrs, which was lesser than 1 Acre. The A.O also mentioned the report of the surveyor Shri. S.D. Kulkarni confirming that the area of the plot mentioned in PMC approval was 43005 Sq.ft. which is less than 1 Acre (43560 Sq.ft.). The A.O did not agree with the explanation of the assessee that another 5 Are of land was purchased subsequently from the same owners which could be included in the calculation of area of the plot. The further objection of the A.O for the denial of the claim was that one row house in building D appeared to be having area in excess of 1500 Sq.ft. He sought report of approved valuer in this regard who also reported that the built up area of row house No. 11C in building D was 1673.50 Sq.ft. besides th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . as claimed by the approved valuer is really excluded from the total area of the row house, it does not exceed 1500 sq.ft. limit. The approved valuer though has mentioned in his report referred in para 3.2 of the first appellate order that the area of gym. Room at basement floor level in D building was not included in the built up area of 1673.50 sq.ft. but in reality, we find that the valuer has not excluded the area of gym. Room/store room. We thus do not find substance in this ground, on the basis of which, the A.O had denied the claimed deduction. The further ground on the basis of which A.O has denied the deduction is the alleged merger of 4 flats deviating from approved plans. We have dealt with this issue hereinabove in ITA No. 629/PN/2009 and held that merger of flats after purchase by the owners thereof to make it into a larger flat for their own convenience will not be a cause for denial of claimed deduction especially when an undisputed fact that each of those flats does not exceed the prescribed area limit 1500 Sq.ft. Under these circumstances, we find that the authorities below were not justified in denying and upholding the claimed deduction u/s. 80IB(10) in questi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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