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TMI Blog2017 (1) TMI 118X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the employees' contribution to PF beyond the prescribed time limit provided in the respective Acts. (ii)(b) Whether on the facts and circumstances of the case and in law, the ld. CIT (A) has erred in holding that employees contribution to PF & ESI are governed by the provision of section 43B and not by section 36(1)(va) read with section 2(24)(x) of the IT Act. (iii) The appellant craves its rights to add, amend or alter any of the grounds on or before the hearing. 2. Briefly stated the facts are that the case of the assessee was picked up for scrutiny assessment and the assessment was framed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act) vide order dated 23.01.2015. While framing the assessment, the AO rejected the claim of deduction under section 80IB(10) of the Act, on the ground that the residential units exceeded the specified limit of 1500 sq. ft. The AO also made disallowances in respect of delay in deposit of PF of Rs. 23,310/-. The assessee aggrieved by this order, preferred appeal before ld. CIT (A), who after considering the submissions of the assessee and relying upon the judgments of the Hon'ble Madras High Court and Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooms, terming it as "terrace" so as to claim the deduction. As discussed above, if the area of the balconies is included, the built up area comes to 1772.81 S. ft, which is much more than the prescribed limit of 1500 S. ft. Since the basic eligibility condition as laid down in clause (c) of Sec. 80IB(10) is not fulfilled, the benefit of deduction u/s 80IB(10) cannot be allowed to the assessee. The built-up area of the shops and other commercial establishments included in the housing project does not exceed (three) per cent of the aggregate built-up area of the housing project or [five] thousand square feet, whichever is higher]; It has been stated that the no commercial establishment is included in the housing project and there is no violation of this condition. Not more than one residential unit in the housing project should be allotted to a person being an individual and in case where a residential unit in such housing project is allotted to a person being an individual, no other residential unit should be allotted to spouse or minor children of his HUF. During the course of assessment proceedings, vide letter dated 17.1.2013, the assessee stated that no flat has been all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a. (b) In the case of Commonwealth Developers CD Fountainhead vs. ACIT (2014) 267 CTR 297 (Bom.), the Bombay High Court has held that the rear courtyard cannot form a part of the 'built up area' of a row house. In this case, the ITAT, Panaji had earlier held that rear courtyard would form part of the built up area of the row house. The Bombay High Court quashed the above decision by holding that - for including any area as built up area there should be something built in such area. When an area was open to sky, question of holding that there was anything built there, to be included as built up area, would not arise at all. The relevant extract of the head notes of this case law is as under - "Held, it was held by Madras High Court in CIT vs. M/s. Mahalakshmi Housing, 2012-TIOL-951-HC MAD-IT, that open terrace area cannot form part of built up area- For including any area as 'built-up area' there should be something built in such area - When area was open to sky question of holding that there was anything built therein to be included as 'built up area' would not arise at all - Following ratio laid down by Madras High Court, area of courtyard was to be excluded to calculate bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idential units. It was an admitted fact that the open terrace in front of pent-house was considered as balcony/verandah. The open terrace being not covered and open to sky would not be part of the inner measurement of the residential floor at any floor level. The definition of 'built-up area' is inclusive of balcony which is not open terrace. The DVO had considered the open terrace as analogous to balcony/verandah without any basis. Therefore, the lower authorities were not justified in rejecting the claim of the assessee by taking the open terrace as balcony/verandah. Therefore, the assessee had complied with all the requirements of section 80-IB(10) in this regard."(Emphasis supplied) (e) The Assessing Officer has relied upon the case of Modi Builders & Realtors (P) Ltd. vs. ACIT - ITA No. 1541/Hyd/2010 of the ITAT Hyderabad, wherein it has held that balcony and portico would be included in the built up area. On this issue there is no dispute. However, this case law is not relevant to the issue under consideration. 3.4. From the decisions of the Madras High Court, Bombay High Court and the ITAT Ahmedabad, discussed above in para 3.3 above, it is seen that the area under cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive buyers and also copies of original sale deeds before the Learned AO which were duly returned by the Learned AO after verification. We find that the Learned AO calculated the 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 stamp duty purposes, the total built up area of each building was below the maximum area specified in section 80IB(10) of the Act. The Learned AO simply ignored the sale deeds that were produced before him and placed reliance on the brochures issued by the assessee to attract prospective buyers and estimated the built up area by including the terrace area. We find that the actual built up area of residential building should not exceed the maximum area specified in the Act and there is no scope for making the assumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... built up area of the flats for the purpose of making out statutory extent of built up area as per Clause (a) of Section 80IB(14) of the Income Tax Act ? Held: 5. It is seen from the facts narrated herein that the assessee is engaged in the business of construction. The assessee entered into an agreement of sale with one Ashok Kumar for joint development of the property. The assessee's claim for deduction under Section 80IB(10) of the Income Tax Act is rejected on the ground that the assessee was not the owner of the land. Aggrieved by the same, the assessee went on appeal 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 Commissioner of Income "Tax. 8y judgment dated 19.10.2012, this Court allowed the assessee's appeal, holding that the ope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oor 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 clause (c) of section 8018(10) of the Act. In this view of the matter, the aforesaid judgement of the Hon'ble Madras High Court and which has been further affirmed in a subsequent decision in the case of Sanghvi and Doshi Enterprise (supra), covers the issue before us.19. However, in the course of hearing, the learned CIT -OR attempted to distinguish the judgement of the Hon'ble High Court by pointing out that the same related to assessment year 2003-04, a period during which the definition 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 lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lan project alone has the right to claim deduction under section 80-IB. Any project undertaken not approved by the Local Authority is outside the purview of the Act. Thus, when a Local Authority, endowed with the jurisdiction to grant the approval is guided in its approval by Regulation as to what constitutes the plinth area, which is the built-up area, it is difficult for us to agree with 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 be sustained. Consequently, we have no hesitation in agreeing with the assessee's contention that open terrace area, even if be private terrace cannot form part of the built-up area" 22. As per the Hon'ble High Court, terrace area would not form part of the built-up area by the reason of the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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