TMI Blog2017 (11) TMI 1212X X X X Extracts X X X X X X X X Extracts X X X X ..... ordingly, the solitary issue raised by the assessee in appeal is allowed. Resultantly, the appeal of assessee is allowed. - ITA No. 1779/PUN/2013, ITA No. 1888/PUN/2013 - - - Dated:- 15-11-2017 - Shri D. Karunakara Rao, AM And Shri Vikas Awasthy, JM Assessee by : Shri Sunil Ganoo Revenue by : Shri Mukesh Jha ORDER Per Vikas Awasthy, JM These two cross appeals by the assessee and Revenue are directed against the order of Commissioner of Income Tax (Appeals)-V, Pune dated 11-07-2013 for the assessment year 2007-08. 2. The only issue raised by the assessee in appeal is denial of benefit of deduction u/s. 80IB(10) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) in respect of Single Row House near H Building in housing project Shyama Heritage developed by the assessee. The benefit of deduction u/s. 80IB(10) has been denied in respect of aforesaid row house on the ground that built up area of the said house including terrace is more than 1500 sq. ft. The Revenue in its appeal has assailed the findings of Commissioner of Income Tax (Appeals) in allowing deduction u/s. 80IB(10) on pro-rata basis in respect of eligible units. 3. Shri Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 The ld. AR contended that the Revenue in its appeal has assailed the findings of Commissioner of Income Tax (Appeals) in granting pro-rata deduction u/s. 80IB(10). Now, it is a well settled law that pro-rata deduction u/s. 80IB(10) is admissible in respect of eligible units of a housing project. Therefore, the appeal of Revenue is liable to be dismissed. 4. On the other hand Shri Mukesh Jha representing the Department vehemently defended the order of Commissioner of Income Tax (Appeals) in rejecting assessee s claim of deduction u/s. 80IB(10) in respect of row house near H building. The ld. DR submitted that the built up area of the house is more than 1500 sq. ft. Thus, there is a violation of clause (c) of sub-section 80IB(10). Hence, the assessee is ineligible for claiming deduction u/s. 80IB(10) on the entire project. 4.1 In respect of appeal filed by the Department the ld. DR contended that the Commissioner of Income Tax (Appeals) has erred in granting prorata deduction u/s. 80IB(10) in respect of eligible units. There is no provision u/s. 80IB(10) for granting proportionate deduction in respect of eligible units. 5. We have heard the submissions made by the represen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s within his own land and courtyards and this shall be subject to a maximum of 1/3 length of perimeter of building and 10% of the floor area of each floor. Balcony shall be permitted to project to marginal open space of not less than 3 mtr in width. 7. Balcony and terrace , whether they are one and the same for the purpose of determining built up area is a matter of debate between the Department and the assessee. The Hon ble Gujarat High Court in the case of Commissioner of Income Tax Vs. Amaltas Associates reported as 389 ITR 175 has held that the terrace is not a projection and is difference from balcony. The relevant extract of the findings of Hon ble High Court are as under : 8. Section 80(14) of the Act contains definitions for the purpose of the said section. Clause(a) thereof provides that builtup 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 the common areas shared with other residential units. Thus, the builtup area would include inner measurements of a residential unit on the floor level added by thickness of a wall as also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court and find that though the Hon ble High Court was considering a project approved prior to 01.04.2005 yet it has taken into consideration the definition of built-up area contained in section 80IB(14)(a) of the Act, which was inserted w.e.f. 01.04.2005. As per the Hon ble High Court even after assuming that such definition was to be retrospectively applied yet the area of open terrace would not fall within the meaning of the expression built-up area . The Hon ble High Court referred to the Indian 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. The relevant discussion in the order of the Hon ble High Court is reproduced hereinafter :- 31. As far as the introduction of definition portion in Section 80- IB(14) w.e.f. 01.04.2005 is concerned, even assuming that the definition Section has retrospective effect, we do not think that the definition given under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nreported decision of the Bombay High Court in Income Tax Appeal No.3315 of 2010 (The Commissioner of Income Tar, vs. M/s.Tinnwala Industries), dated 13.04.2012. A reading of the decision of the Bombay High Court shows that the issue raised therein related to the Assessment Year 2004-2005. Similar contention raised before the Court was taken before the Bombay High Court too. Holding the view that the expression Built-up area in a Housing Project approved by the Local Authority does not include the balcony area for the period prior to 1st April 2005, the Bombay High Court held that when the Legislature has introduced the definition of ''Built-up area by including the balcony area from a particular date, then, the same could not be applied retrospectively. 34. In the decision reported in [2012] 21 Taxmann.com 140 (Karnataka), Commissioner of Income Tax, Central circle vs. Anriya Project Management (Services) Private Limited, rendered by Karnataka High Court, a similar such question was considered. The Karnataka High Court pointed out that prior to 01.04.2005, open balcony area have to be excluded in calculating the built-up area. The Karnataka High Court further poin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o by the Revenue. Given the fact that contemplation of deduction is to Housing Projects approved by the Local Authority, we hold that once the Local Authority have excluded open terrace from the working of Built-up area, it is not open to the Revenue to review the approval given by the competent authority to hold that terrace would also be included in the built-up area. As already held the definition also does not speak in different language from what is given in the measurement provision of Bureau of Indian Standard in the context of the definition of Balcony in the Indian Standard. 37. In the circumstances, we have no hesitation in allowing the assessee's appeal, by setting aside the order of the Tribunal. Thus, we hold that the assessee is entitled to deduction in respect of flats in the 7th floor, which do not exceed the required extent as per Section 80-IB (10)(c) that open terrace area, cannot form part of the built-up area. 21. Notably, the Hon ble High Court also considered an argument from the side of the Revenue to the effect that the sale of the area of open terrace by the assessee to the respective purchaser would justify the inclusion of such terrace a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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-DR 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 attached to the residential unit and there being no room under such terrace, even if the same is available exclusively for use of the respective unit-holders. 9. The Commissioner of Income Tax (Appeals) has referred to Rule 15.4.2 r.w. Rule 15.4.1 which talks about projection and balcony. However, there is no reference to the term terrace in said rules. In our considered view when there is no mention of terrace in the Rules relied upon by the Commissioner of Income Tax (Appeals), the same cannot be read into the explanation or the Rules to say that balcony and projection are the same as terrace. 10. In the present case the terrace which is subject matter of dispute is over car parking and open to the sky. The Co-ordinate Benc ..... 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