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2016 (3) TMI 84 - ITAT KOLKATA

2016 (3) TMI 84 - ITAT KOLKATA - [2016] 46 ITR (Trib) 17 - Deduction u/s 80IB(10) - exclusion terrace area - Built up area exceeding 1500 sq.ft including terrace area - Held that:- The terrace area needs to be excluded from the built up area and if the same is excluded, then the resultant built up area is well within the 1500 sq.ft limit prescribed in the statute and hence rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order.

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t separately. Hence the deduction u/s 80IB(10) of the Act should be claimed unit wise and hence rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order. - Decided in favour of assessee. - ITA No. 12/Kol/2014 - Dated:- 22-1-2016 - Shri Mahavir Singh, Judicial Member, and Shri M. Balaganesh, Accountant Member For The Appellant: Shri Subash Agarwal, and Miss Varsha Jalan, Advocates, ld.ARs of the assessee For The Respondent: Shri Uday Kr. Sardar, JCIT/ld. Sr. .....

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ances of the case. 3. The brief facts of this issue are that the assessee is engaged in the business of construction and sale of flats by developing and building Housing Projects. The assessee had undertaken a housing project styled as Ashiana Amarbagh Jodhpur, in Phase -I, stituated at Village -Kudi Bhagtasani, Jodhpur Pali Road, Jodhpur - 342001, Rajasthan. The assessee claimed deduction u/s 80IB(10) of the Act in respect of profits derived from this housing project. The Learned AO observed th .....

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rom an Architect thereby violating the provisions of Explanation (ii) to section 80IB(10)(a) of the Act ; Size of residential units is more than 1500 sq.ft including the terrace area thereby violating the provisions of section 80IB(10)(c ) of the Act ; Built up area of commercial establishment included in the project is higher than 3% of the aggregate area and more than 5000 sq.ft thereby violating the provisions of section 80IB(10)(d) of the Act. The action of the Learned AO was upheld by the L .....

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e facts and in circumstances of the case and in law, the CIT(A) has erred in disallowing the deduction claimed u/s 80-IB(10)(a) of the Act on the alleged ground that the appellant had not obtained the completion certificate from the local Authority whereas the appellant had duly fulfilled the condition stated in the aforesaid section of the Act. The CIT (A) had erred in neglecting the certificate issued by the local Authority and confirmed the addition made by the Assessing Officer without consi .....

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CIT(A) has wrongly confirmed the re-calculation of the built up area made by the A.O. without considering the full facts of the case. The disallowance made by the CIT(A) on this ground is not correct and misleading the fact of the case. 4) That on the facts and in the circumstances of the case, the CIT (A) has erred in confirming the addition made by the A.O. u/s 80-IB(10)(d) of the Act on the alleged ground that the appellant has violated the conditions stated in clause(d) of sub-section(10) o .....

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vied by the Assessing Officer under the provisions of section 234B of the Act. 6) That the appellant craves leave to add any additional grounds and / or amend, alter, modify or rescind the grounds herein above before or at the hearing of the appeal. 4. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We feel that each of the issue based on which the revenue had rejected the claim of deduction u/s 80IB(10) of the Act .....

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certificate is issued to such buildings which are above than 15 meters in height and stated that for official purposes, a certificate from registered architect would suffice. Accordingly the assessee sought to obtain a completion certificate from a Registered Architect. It would be pertinent to reproduce the letter of Jodhpur Development Authority addressed to the assessee expressing their inability to issue the completion certificate for the housing project of the assessee as below:- Office of .....

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e 16 of the housing bye-laws, the provision of granting of "Completion Certificate" is in respect of construction of houses having. height of above 15 metres. As per your letter, since the height of the houses constructed in your residential project is less than 15 metres, the same does not fall within the purview of the requirement of the issue of "Completion Certificates" as provided in the housing bye-laws. Thus, there is no necessity to issue Completion Certificate for yo .....

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m Dated 18 Feb 2010 Ashina Amar Developers Village Kuri Bhagtasani, Jodhpur Pali Road, Jodhpur-342001 Sub: Completion Certificate of Phase I, Ashiana Amerbagh, A Housing Project of Ashina Amarbagh Developers At Village Kuri Bhagtasani, Fatwar Jhalamand, Tehsil & District Jodhpur, Rajasthan This is to verify that construction of Phase I of Ashiana Amarbag comprising of 95 dwelling units bearing no. E-16 to E-30, N-01 to N-08, N-35 to N-50, N-77 to N-84, S-01 to S-12, S-36 to S-59, S-86 to S-9 .....

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opment Authority which has been placed on record by the Learned AR wherein it has been stated as under:- 15. Completion certificate :- 15.1 On completion of building having a height of more than 15 metres, the builders has to obtain a completion certificate. The said certificate will be given by the competent Authority only after necessary verification and according to the following procedures. 4.1.3. We find from the above correspondences that the assessee had duly applied for the completion ce .....

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l dictum LEX NON COGIT AD IMPOSSIBLIA (i.e the law cannot compel a man to perform an act which he could not possibly perform) which has been given due credence by the Hon ble Supreme Court in the case of Krishnaswamy S. Pd.& Anr. Vs Union of India & Ors reported in (2006) 281 ITR 305 (SC) , wherein it was held that the maxim actus curiae neminem garvabit, i.e ., an act of court shall prejudice no man , is founded upon justice and good sense which serves a safe and certain guide for the a .....

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etar Corporation reported in (2014) 362 ITR 174 (Guj) wherein it was held that : It is equally true that Explanation to Clause (a) to section 80IB(10) of the Act links the completion of the construction to the Building Use Permission being granted by the local authority. However, not every condition of the statute can be seen as mandatory. If substantial compliance thereof is established on record, in a given cases, the court may take the view that minor deviation thereof would not vitiate the v .....

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ficate issued by the Village Panchayat is not valid and therefore the assessee is not entitled to the said benefit. Admittedly the plan is sanctioned by the BDA. The BDA has not issued any completion certificate. The reason being, in the BDA Act or the Karnataka Municipal Corporation Act, there is no provision for issue of completion certificate. The provision in the Karnataka Municipal Corporation Act is for issuance of occupancy certificate. When the statute does not provide for issue of a com .....

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e would be left with no option except to get such certificate with some authority which would be called as a local authority. In the facts of this case, we are of the view that the Tribunal has recorded a finding that the building was completed within the stipulated period and therefore de hors this certificate issued by the Panchayat after the building is completed, the assessee is entitled to the said benefit. In that view of the matter, we do not see any merit in these appeals. Accordingly, t .....

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issuance of a completion certificate. There is a provision for sanction of a plan, issue of a licence, issue of a commencement certificate and issue of an occupancy certificate. In those circumstances, if the Revenue were to insist on production of a completion certificate, they are asking the assessee to do something which is impossible and which is not proper in law. It is high time the Revenue, keeping in mind the relevant law governing the State of Karnataka, would suitably amend the law or .....

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m a local authority would only result in impossibility of performance on the part of the assessee. Accordingly, the rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order. 4.2. Built up area exceeding 1500 sq.ft including terrace area We find that the meaning of the term built up area is given in section 80IB(14)(a) of the Act as under : built up area means the inner measurements of the residential unit at the floor level, including the projection and bal .....

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t up area. The inner measurement of a residential unit should only be taken for calculation of built up area. The built up area of each unit is within 1500 sq.ft. He further argued that as per the National Building Code of India, the definition of Plinth Area and Covered Area are given separately which also supports the above fact. For the sake of convenience, the relevant portion of National Building Code of India is reproduced herein below:- 2.65 Plinth Area-The built up covered area measured .....

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gutter and the like; c) Compound wall, gate, unstoreyed porch and portico, canopy, slide, swing, uncovered staircase, ramps areas covered by CHHAJJA and the like; and d) Watchmen s booth, plumphouse, garbage shaft, electric cabin or sub-stations, and such other utility structures meant for the services of the building under consideration. NOTE- For the purpose of this Part, covered area equals the plot area minus the area due for open spaces. 4.2.1. We find that the Learned AO during the course .....

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super built up area of each building based on the brochures by including the area of open terrace and therefrom estimated the built up area by taking 90% of the super built up area of each building as built up area. We find that the Learned AO brushed aside the argument of the assessee that the brochures are only indicative in nature and the actuals may vary from what is stated in the brochures. The assessee also tried to explain that as per the sale deed which was registered with Registrar for .....

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for making the assumptions and estimates. 4.2.2. Reliance is placed on the co-ordinate bench decision of Mumbai Tribunal in the case of ACIT vs Sheth Developers reported in 33 SOT 277 (Mum) wherein it was held that the built up area has to be calculated on an actual basis and not on the basis of estimates. In that case, the AO relied on a ratio worked out from the map attached with the occupancy certificate, for arriving at the built up area from the carpet area which was turned down by the Trib .....

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l unit at the floor level including the projections and balconies as increased by the thickness of the walls but does not include the common areas shared with other residential units. Hence it could be concluded that the open terrace is not covered within the meaning of built up area as it is open to sky and would not be part of the inner measurement of the residential floor at any floor level. Reliance in this regard is made on the decision of the co-ordinate bench of Ahmedabad Tribunal in the .....

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on ble Madras High Court in the case of CIT vs M/s Mahalakshmi Housing in Tax Case (Appeal) Nos. 583 & 584 of 2011 and 316 & 317 of 2012 dated 2.11.2012, wherein the questions raised before their Lordships and the decision rendered thereon are as under:- Whether on the facts and circumstances of the case, the Appellate Tribunal is right in law in holding that the private terrace area should be included in the built up area of the flats for the purpose of making out statutory extent of bu .....

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eal before the Commissioner of Income Tax (Appeals), who dismissed the appeal. Aggrieved by the same, the assessee went on further appeal before the Income Tax Appellate Tribunal. 6. The Tribunal considered the assessee's appeal along with two other assessees' appeals involving similar questions of law and passed a common order. One such assessee's case came up for consideration in T.C.Nos.581, 1186 of 2008 and 136 of 2009 in the case of Ceebros Hotels P\It. Ltd. Vs. Deputy Commissio .....

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inciple of proportionality for grant of relief, yet, we find by reason of exclusion of open terrace area from the built up area, application of proportionality theory does not arise. In the circumstances, we find no justifiable ground to accept the plea of the Revenue on this aspect. 8. As far as the Revenue s contention that for the purpose of Section 80- IB(10} deduction, the assessee should have owned the property is concerned, the same is liable to be rejected by reason of our decision rende .....

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nal in the case of Shri Naresh T. Wadhwani vs DCIT in ITA No.s 18, 19 & 20 /PN/2013 for Asst Years 2007-08,2008-09 & 2009-10 dated 28.10.2014, wherein it was held that :- 18. A bare perusal of the aforesaid question of law before the Hon'ble Madras High Court would reveal that the issue related to whether open space of the terrace would fall within the expression 'built-up area'. The facts before the Hon'ble High Court were that assessee had constructed various apartment .....

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cated at the 7th floor exceeded 1500 sq.ft. and hence the Assessing Officer held that the condition prescribed in clause (c) of section 8018(10) of the Act was not fulfilled. The said position taken by the Assessing Officer was upheld right up to the Tribunal. However, the Hon'ble High Court disagreed with the stand of the Revenue and held that such open terrace would not be includible in the calculation of 'built-up area' for the purpose of examining the condition prescribed in clau .....

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of 'built-up area' contained in section 801B(14)(a) of the Act was not on the statute and also the fact that the housing project under consideration of the Hon'ble High Court was approved by the concerned local authority prior to 01.04.2005 i.e. prior to the date when the definition of 'built-up area' was brought on the statute by way of section 80IB(14)(a) of the Act. 20. We have carefully perused the judgement of the Hon'ble Madras High Court and find that though the H .....

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an Standard Method of Measurement of Plinth, Carpet and Rentable Areas of Buildings as issued of Bureau of Indian Standards and also the meaning of the aforesaid expression assigned as per the rules and regulations of the local authority and concluded that an open terrace could not be equated to a 'projection' or 'balcony' referred to in section 80IB(14)(a) of the Act. 21. Notably, the Hon'ble High Court also considered an argument from the side of the Revenue to the effect t .....

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errace being an open area, not being a projection and hence, not included in the plinth area, the question herein is as to whether the Tribunal is justified in confirming the order of assessment to include the terrace area into the built-up area solely by reason of the fact that the assessee had sold it to purchasers of the 7th floor as a private terrace. 30. We do not think, the Tribunal is justified in taking the view that open terrace would form part of the built-up area for the purpose of su .....

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ith the contention of the Revenue as well as the reasoning of the Tribunal that for the purpose of considering the claim under section 80-IB, the built-up area would be different from what has been given approval by the Local Authority, on a building project. Given the fact that during 2003-04 there was no definition at all on what a built-up area is, the understanding of the Revenue, which is evidently contrary to the approval of the Local Authority based on the Rules and Regulations could not .....

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being available for exclusive use of the respective unit owner is a ground to consider it as a part of 'built-up area' for the purposes of clause (c) of section 80IB(10) of the Act. Thus, the argument of the learned CIT-OR is hereby rejected. 23. In view of the aforesaid judgement of the Hon'ble Madras High Court, we are unable to uphold the stand of the Assessing Officer to include area of terrace as a part of the 'built-up area' in a case where such terrace is a projection .....

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order. 4.3. Commercial area in the project is more than 3% The Learned AR argued that as per the sanctioned plan, the total area is sanctioned by the local authority is 69.12 bighas. Out of this , the assessee herein has only 58 bighas of land for construction and for the balance 11.12 bighas of land, M/s Miras Properties Pvt Ltd has entered into a separate partnership agreement with another firm. He argued that in assessee s project land of 58 bighas, there are no commercial establishments as c .....

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and marketed on the Project Land and more fully described in Article 5.0 hereunder. Article 5.0 - PROJECT 5.1. The Project of the Firm shall be to design, develop and construct a residential housing colony on the Project Land consisting of several residential units so that the residential status of the Project is maintained and the Firm gets exemption under section 80IB of the Income Tax Act, 1961. 4.3.2. We find from the Partnership Deed dated 27.2.2007 entered into between Miras Properties Pv .....

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shall be to design, develop and construct a Commercial and residential colony on the Project Land consisting of several units. We find from this partnership deed that the parties hereto have agreed to develop the project land measuring 11 Bighas in partnership on the terms and conditions stated thereunder. We also find from this partnership deed that Miras Partners have formulated a plan and project for development of the land in accordance with a lay out plan and such lay out plan has been app .....

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were sold to other parties by the land owner. We find that the Ashina Amar Infrastructure had carried out the commercial project which is an independent legal entity for income tax purposes. We also find from the Learned CITA order that the assessee had duly made available the copies of the brochures issued by it in order to attract prospective buyers. As per the submission of the Learned AR, it is clearly discernible that both properties were independent units and belonging to two separate enti .....

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residential units has been approved separately then the deduction should be allowed on each residential units separately. 4.3.4. We also find that the case law relied upon by the Learned DR on the decision of Hon ble Karnataka High Court in the case of CIT vs Raghavendra Constructions reported in (2013) 354 ITR 194 (Karn) is actually in favour of the assessee wherein it was held that : In calculating the built up area it is only the inner measurements of the residential unit on the floor level, .....

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l unit, it does not mean that every common area should be shared with other residential units. If that area does not exclusively belong to the owner of residential unit and if he has to share that common area with the owner of another residential unit, then that common area has to be excluded from the built up area. If this principle is kept in mind and applied to the facts of this case, in respect of 16 flats, the common area is shared by these 16 owners of residential units. In respect of A-1 .....

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