TMI Blog2011 (1) TMI 1445X X X X Extracts X X X X X X X X Extracts X X X X ..... 59,75,060/- which was claimed as exempt u/s.80IB (10) of the Act. The AO noted that the project under construction comprised of three buildings named as Building No.1 (A-Wing), Building No.2 (B-Wing) and Building No. 3 (C-Wing). Buildings No.1 2 comprised of only flats, while Building no. 3 comprised of two identical bungalows. The AO noted that during the year under consideration, i.e. asstt. year 2005-06, the assessee had completed Building No. 1 (i.e. A-Wing) of the project Anant Regency, Phase-II , for which permission was sought from the Kalyan Dombivli Municipal Corporation, Kalyan (hereinafter referred to as KDMC, Kalyan ) on 23-05-2002 and the last plan was passed by KDMC, Kalyan, on 0606-2006. The AO further observed that after the issue of show cause letter on 05-12-2007, the assessee had submitted another approval from KDMC, Kalyan, dated 17-12-2007. Thus, he found that during the year under consideration, Building No.2 (i.e. B-Wing) was under construction and for Building No. 3 (i.e. CWing), the construction had not yet started as its approval was obtained after asstt. year 2005-06. Thus, he concluded that the project Anant Regency, PhaseII , was not complete on 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s per the plan submitted by the assessee and his architect and plans obtained from KDMC, Kalyan, it is seen that the total area of original plot was 5,100 sq. mts. However, 1186 sq. mts. of land, which was part of the original plot, had to be surrendered to KDMC, Kalyan, for a 18 mts. wide D.P. Road and the remaining area left for the project was 3914 sq. mts., which was less than 1 acre. Thus, the area of the plot on which the project stands and the area around which the assessee or housing society can construct boundary wall and the area of plot of land which is in assessee s possession for the purpose of construction remains 3914 sq. mts., which is less than 1 acre. Therefore, deduction u/s.80IB (10) is not allowable. ii) Maximum built-up area of the residential units of 1500 sq.ft: The AO observed that in view of the requirements of sec. 80IB (10) (c), the assessee s project being more than 25 kms. away from the local limits of Mumbai, built-up area of 1500 sq. ft. is allowed. He pointed out that built-up area, as commonly understood or as adopted by builders or Municipal Corporations, is different from the built-up area for the purpose of sec. 80IB (10) as defined in sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1040.66 sq.ft. The AO concluded that the total built up area was as under: 1. Area of each unit as above 1451.00 sq.ft. 2. Area of Foyer 78.15 sq. ft. 3. Area of two terraces on each unit 319.47 sq. ft. 4. Exclusive Open Area with each unit 1040.77 sq.ft. 2889.2 sq.ft. Therefore, he concluded that the total area of unit being more than the permissible area, the project does not qualify for deduction u/s.80IB (10) of the I.T. Act. iii) Project to be completed before 31st March, 2008: The AO referred to sec. 80IB (10) (a)(i) and pointed out that the project approved by the local authority before 1-4-2004 had to be completed by 31-3-2008. He noted that as per letter dated 29-9-2006 of the Secretary of Anant Housing Corporation Ltd. (i.e. Building No.1, Anant Regency, Phase-II) to the KDMC, Kalyan, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an to the KDMC, Kalyan, for approval which was subsequently approved on 17-12-2007 whereby Foyer had been removed and terrace area had been shown as slanting and not as flat terrace. The AO pointed out that even if these two area were removed, still each unit had 1500 sq.ft. Therefore, this condition was not satisfied. iii) Project to be completed before 31-3-2008. In this regard, the AO pointed out that copy of MRTP Court had not been produced by the assessee before him. Therefore, an Inspector was deputed to make field enquiry who submitted his report that there is no further progress in the construction in Building No. 3 and the same is lying as it is at the first slab of the RCC stage. Further, in view of the statement of Architect also, it would take at least 6 months to complete the construction of Building no. 3 even if construction resumed immediately. He, therefore, disallowed the claim u/s.80IB (10). 3. Before the ld. CIT(A), detailed submissions were made vide written submission dated 3-3-2008 as reproduced in para 4 of his order, on which the ld. CIT(A) has called for a remand report. The AO, vide his letter dated 4-4-2008, submitted his reply which has been re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form to the project plan approved by the local authority in accordance with the regulations in force. Also the area limit of the plot has to be construed with reference to the area of the site on which the housing project is constructed and not with reference to the demarcation of land down by he land development authority. The ld. counsel further referred to page no. 56 of the paper book wherein the sanctioned plan is contained and pointed out that the area of the plot was 5100 sq. mts., for which there is no dispute. As regards he second reason for sustaining the disallowance by the CIT(A) on the ground that the project had not been completed before 31-3-2008, the ld. counsel submitted that since litigation was going on in regard to 3rd building, the project could not be completed. He, therefore, submitted that the third building may be excluded and pro rata deduction may be allowed. In this regard, the ld. counsel relied on the following decisions: 1.Bengal Ambuja Housing Development Ltd. vs. DCIT In ITA No.1595/Kol/2005 dated 24-3-2006 (ITAT, C-Bench,Kolkata). 2. DCIT vs. Brigade Enteprises (P) Ltd. 119 TTJ(Bangalore) 269 (2008). 3. ITO vs. AIR Developers 123 TTJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... metres. It will be seen that the total plot area has been worked out by the MNP at 3597.51 sq. metres only after deducting 591.49 sq. metres for recreation open space. The recreation open space is however part of the plot and though for the purpose of municipal regulations, a portion of the plot has to be reserved as a recreation area but for the purpose of clause (b) of section 80IB(10), the recreation area has also to be considered as part of the plot only. There is no condition in the clause that recreation area has to be excluded while examining whether the plot is of the size of one acre or less. If the recreation area of 591.49 sq. metres is added to the total plot area of 3597.91 sq. metres, it gives an area of 4189 sq. metres which is the size of the plot. The total plot area has been arrived at by MNP 3597.51 only for the purpose of calculating the permissible FSI. The permissible FSI as per column 9 of the area statement is one, which means that the assessee can build 3597.91 sq. Metres in the said plot. However, for the purpose of clause (b) of section 80IB(10), the plot area has been taken at 4189 sq. metres, if not at 4600 sq. metres, even on this basis, the size of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er residential units wherein the size of individual unit exceeded 1500 sq. ft. of built up area. Under these circumstances, the assessee had claimed deduction u/s.80IB (10) with reference to the profit attributable to the built up area which was occupied by residential units having individual flat size of less than 1500 sq. ft. The AO rejected the claim of the assessee u/s. 80IB (10), inter alia, observing that as per the terms of sec. 80IB(10), all the units comprised in the housing project should have had individual flat size of less than 1500 sq.ft. In the backdrop of these facts, the Tribunal observed that the provisions laid down in sec. 80IB(10) do not speak regarding such denial of deduction in case of profit from a housing complex containing both the smaller and large residential units and since the assessee had claimed only deduction on account of smaller qualifying units by fulfilling all the conditions as laid down u/s.80IB(10), the denial of claim by the AO was not justified. 6.2 In the case of Brigade Enterprises (P) Ltd. (supra), the facts were that the assessee formed a single project by name Brigade Millennium comprising a total area of 22 acres and 19 guntas i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imit of 1500 sq. ft. as laid down u/s.80IB (10) (c). However, in the present case, the deduction has been denied, inter alia, on the ground that the project could not be completed before 31-3-2008. It is not disputed that this condition has not been fulfilled. Now, in the light of the aforesaid decisions, we have to consider what would be the consequences of the project being not completed by 31-3-2008. This is the basic condition for allowability of deduction u/s.80IB. We find considerable force in the submission of ld. DR. However, since this condition could not be complied with because of stay being granted by MRTP Court, fault cannot be found with the assessee. If such a contingency emerges, which makes the compliance with the provisions impossible, then the benefit bestowed on an assessee can not be completely denied. We may clarify that it is only in such exceptional circumstances that the deduction cannot completely be denied but this cannot be extended to such situations where the project is not completed on account of reasons within the control of assessee. In the case of Brigade Enterprises (P) Ltd. (supra), the Tribunal observed that the use of words residential units ..... X X X X Extracts X X X X X X X X Extracts X X X X
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