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2013 (11) TMI 1673 - ITAT PUNE

2013 (11) TMI 1673 - ITAT PUNE - TMI - Deduction u/s.80IB(10) - Held that:- The main limb on which deduction was denied was for the reason that area of verandah was not excluded or exempt under section 78(3) of the Bye-laws of Kolhapur Municipal Corporation. CIT(A) following the decision of his predecessor, decided the issue in favour of assessee with regard to 19 bungalows. With regard to bungalows C5 and D5 which admittedly are more than 1500 sq.ft., but were sold to the owners of the land and .....

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s under: - Built up area means the inner measurements of the residential unit at the floor level including the projections and balconies as increased by the thickness of the walls but does not include common areas shared with other residential areas.Technically speaking, the definition of 'built up area' as given above will be applicable only with effect from 01/04/2005. The Honourable Supreme Court in a recent Five Judge Bench decision in the case of CIT V/s Varas International Pvt. Ltd. [2 .....

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essee by : Shri M.K. Kulkarni ORDER PER SHAILENDRA KUMAR YADAV, JM: All these appeals filed by Revenue and Cross Objections are filed by assessee pertain to same assessee and arising from the consolidated order of the CIT(A), Kolhapur dated 13-12-2012 for the A.Ys. 2005-06 to 2009-10, so all are being disposed off together for the sake of convenience. The Revenue has taken the following grounds in its appeals in A.Y.2005-06. 1. Whether on the facts and in the circumstances of the case and in law .....

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section 80IB(10) (c ) of the said Act in constructing the 21 bungalows exceeding the limit of 1500 s.f.t. for each bungalow as provided in the said provision irrespective of the fact that such violation was marginal or more. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals), Kolhapur was justified in not appreciating that in order to claim deduction u/s.80IB(10) of the I. T. Act, 1961 the assessee has to fulfill all the conditi .....

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pointing out such fact was in the possession of the Ld. CIT(A) and when the said issue was dominant in deciding the allowability of deduction u/s.80IB(10) of the act as claimed by the assessee. 5. Whether on the facts and in the circumstances of the case and in law, the Ld. Commissioner of Income Tax (Appeals), Kolhapur was justified in holding that space occupied by 'verandah' has to be excluded for the purpose of calculating the 'built up area' of the bungalows. 6. The order of .....

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n u/s.80IB(10) in respect of his housing project Bhakti Pooja Nagar. Assessee has also made similar claim in earlier years i.e. 2003-04 and 2004-05 in respect of above housing project. In these years, in the assessment order passed u/s. 143(3), assessee claim was rejected on the ground that residential units exceeded 1500 sq.ft., being maximum area permissible u/s. 80IB(10). 2.1 The issue of claim u/s. 80IB(10) was examined in all the years under appeal. Assessee had obtained approval for his pl .....

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owable built up area of 2000 sq. ft., and similarly, the built up area of the shops and other commercial establishments was in excess of 5% of aggregate built up area of the housing project. In view of the violation of section 80IB(10) as observed above, the Assessing Officer asked the assessee to justify the claim of deduction in respect of the above project. CIT(A) having considered the submissions on behalf of assessee all kinds i.e. built up area of two residential units C-5 and D-5 are perm .....

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de and that of the Assessing Officer. 2.3 After going through the rival submissions and material on record, we find that section 80IB(10) prior to amendment to the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 stood as under: "(10) The amount of profits in case of an undertaking developing and building housing projects approved before the 31st day of March, 2005 by a local authority, shall be hundred percent of the profits derived in any previous year relevant to any assessment year from such .....

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d and five hundred square feet at any other place." 2.4 Section 80IB(10) in post amendment period stood as under: "17[(10) 18The amount of deduction in the case of an undertaking developing and building housing projects approved before the 31st day of March, 19[2008] by a local authority shall be hundred per cent of the profits derived in the previous year relevant to any assessment year from such housing project if,- (a) such undertaking has commenced or commences development and cons .....

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e housing project is approved by the local authority. (iii) in a case where a housing project has been approved by the local authority on or after the 1st day of April, 2005, within five years from the end of the financial year in which the housing project is approved by the local authority.] Explanation-For the purposes of this clause,- (i) in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the .....

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ance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum built-up area of one thousand square feet where such residential unit is situated within the cities of Delhi or Mumbai or within twenty-five kilometres from the municipal limits of these cities a .....

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t is allotted to a person being an individual, no other residential unit in such housing project is allotted to any of the following persons, namely:- (i) the individual or the spouse or the minor children of such individual, (ii) the Hindu undivided family in which such individual is the karta, (iii) any person representing such individual, the spouse or the minor children of such individual or the Hindu undivided family in which such individual is the karta.] 25 [Explanation.-For the removal o .....

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tions and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units;] 2.5 The provision of section 80IB(10) prior to the amendment by Finance (No.2) Act, 2004 w.e.f. 01.04.2004 permitted a deduction of 100% of the profit derived in any previous year relating to any assessment year from housing project subject to conditions in respect of such housing project which was approved prior to 31.03.2005. These conditions required the .....

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r qualified necessitating completion of construction on or before 31.03.2008 if project was approved by local authority before 01.04.2005 i.e. within 4 years from the end of the financial year in which housing project is approved by the local authority if the project was approved by the local authority on or after 01.04.2004 but on or before 31.03.2005, and within 5 years from the end of the financial year in which housing project is approved by the local authority if the project was approved by .....

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nged to 3% of aggregate area of housing project or 5000 sq.ft. whichever is higher w.e.f. 01.04.2010. 2.7 Clause (a) of sub-section 14 was introduced by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 to define built up area as the inner measurements of the residential unit at the floor lever, including projection and balconies as increased by the thickness of walls, but not including common area shared with other residential units. 2.8 In the instant case, the insertion of definition of built up .....

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unit as laid down under the statute. He found two residential bungalows have area of about 1500 sq.ft. and 19 residential bungalows have area of beyond stipulated 1500 sq.ft. of verandah was also included. Assessing Officer noticed that project contained residential units built for owners of land and transferred to them in consideration as price in terms of development agreement, residential units to be sold to the public and shops for sale. He noted that project accounts were not maintained fo .....

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hose being constructed for land owners, except two bungalows were found below 1500 sq.ft. Thereafter, Assessing Officer applied provision of clause (a) of sub-section 14, introduced by the Finance (No.2) Act, 2004 w.e.f. to define built up area and included the area of verandah in built up area in respect of 19 others bungalows to hold that provisions of section 80IB(10) were not complied with. He also noticed that area of verandah is not excluded or exempted u/s. 78(3) of the Bye-Laws of Kolhap .....

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Officer, other condition of the total area of commercial shops was also violated in as much as the total built up area of shops (6701.43 feet) was found to be exceeding maximum limit of 2000 feet. According to Assessing Officer prior to 01.04.2005 there was no scope under the Act to construct any commercial space, hence, he held that by virtue of constructing and selling commercial space admeasuring 6701.43 feet, the assessee was not eligible for deduction u/s.80IB(10). 2.9 Regarding denial of .....

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he local authorities could approve the projects as housing projects with commercial user to the extent permitted under the Development Control Rules framed by the respective local authority. The local authority could approve a housing project without or with commercial use to the extent permitted under Development Rules as held in CIT, Pune Vs. Brahma Associates (2011) 333 ITR 289 (Bom), wherein, the Hon ble Bombay High Court held as under; 22. It is not in dispute that where a project is approv .....

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the deduction under section 80-IB(10) prior to 1-4-2005 was allowable on the profits derived from the housing projects constructed during the specified period, on a specified size of the plot with residential units of the specified size, it cannot be inferred that the deduction under section 10-IB(IO) was allowable to housing projects having residential units only, because, restriction on the size of the residential unit is with a view to make available large number of affordable houses to the c .....

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he fact that the deduction is restricted to housing projects approved for residential units only cannot be accepted. 25. The above conclusion is further fortified by clause (d) to section 80IB(10) inserted with effect from 1-4-2005. Clause (d) to section 80IB(10) inserted with effect from 1-4- 2005 provides that even though shops and commercial establishments are included in the housing project, deduction under section 80-IB(10) with effect from 1-4-2005 would be allowable where such commercial .....

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serting clause (d) to section 80IB(10) the Legislature has made it clear that though the housing projects approved by the local authorities with commercial user to the extent permissible under the DC Rules/Regulations were entitled to section 80IB(10) deduction, w.e.f. 01.04.2005 such deduction would be subject to the restriction set out in clause (d) of section 80IB(10). Therefore, the argument of the revenue that w.e.f. 01.04.2005 the Legislature for the first time allowed section 80IB(10) ded .....

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no interference from our side on this point. We uphold the same. 3. In respect of other reason that 21 bungalows violated the requirement of residential unit being more than 1500 feet and therefore, the deduction would be denied. The clause (a) of subsection 14, introduced by the Finance (No.2) Act, 2004 w.e.f. 01.04.2005 to define built up area wherein projection commonly known as verandah is included in the 'built-up area'. The issue is whether the provisions of clause (a) of sub-sect .....

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by Finance (No.2) Act, which became effective from 01/04/2005 is prospective or retrospective in nature. It was held to be prospective in nature. The said amendment would have no application to the housing projects, which were approved by the local authority prior to 01/04/2005 in calculating 1500 feet of residential unit and it further held that once such housing project of assessee is approved by local authority prior to 01.04.2005, it would be entitled to 100% benefit of provisions of Sectio .....

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te was held that criteria to hold this amendment retrospective was absent as there was no explicit retrospective specific wording expressing retrospectivity and even if it is assumed for the sake of arguments that the same is to be read by implication the same does not appear to be reasonable but, in fact emerges to be harsh and unreasonable when it comes to implementation. Thus, the amendment with respective built up area discussed above was found substantive amendment and not clarificatory one .....

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land and profit thereof has not been the subject matter of section 80IB(10). Accordingly, no adverse view has taken by CIT(A). Coming back to the issue of built up area as per bye-laws of Kolhapur Municipal Corporation with regard to 19 bungalows mentioned above, we find that Tribunal has set aside this issue to Assessing officer by observing as under; 9. I have considered the submissions of the appellant. Themain issue concerns the definition of built up area. There was no definition in the Ac .....

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