TMI Blog2013 (11) TMI 1745X X X X Extracts X X X X X X X X Extracts X X X X ..... xecuted by the assessee was not of the nature of works contract and the assessee undertook investment risk. The ownership is not an essential condition to get the benefit under section 80IB(10). In this case, the assessee being a developer as well as builder is entitled for deduction under section 80IB(10) of the Act. The decision in this case of CIT v. Vandana Properties [ 2012 (4) TMI 54 - BOMBAY HIGH COURT] CTR 258 CIT v. Sanghvi and Doshi Enterprise 255 CTR (Mad) 156 [ 2012 (12) TMI 84 - MADRAS HIGH COURT] were followed. In the result, the appeal filed by the Revenue and the Cross Objection filed by the assessee are dismissed. - ITA No. 1650/Mds/2012 Assessment Year 2009-10 & C.O.No.165/Mds/2012 [in ITA No. 1650/Mds/2012] - - - Dated:- 12-11-2013 - Mr.O.K. Narayanan And Shri V. Durga Rao, JJ. Appellant by : Shri K.K. Arumugam, CIT Respondent by : Shri G. Baskar, The Assistant Commissioner of Income Tax, Business Circle IV, Chennai Versus Shri S. Muthu Palaniappan, Advocate ORDER V. Durga Rao, This appeal filed by the Revenue and the Cross Objection by the assessee are directed against the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder the guise of selling the house. He also observed that giving divided share of land would give the discretion to modify the existing structure to the customer. They can also change the built up area. If a person has a land of 1500 sq.ft., he can construct a house of 2250 sq.ft. Thereby, the very intention of the legislature to define a built up area limit of 1500 sq.ft. is completely defeated. In view of the above, the Assessing Officer has concluded that the housing unit is not the housing project as per section 80IB(10) as envisaged by the legislature and denied the claim of assessee under section 80IB(10) of the Act. 4. The next aspect as considered by the Assessing Officer is whether the project is of the nature of works contract and the assessee undertook investment risk or contract risk. In the assessment order, the Assessing Officer has observed that the assessee had entered into construction agreement with various buyers of the houses in his housing scheme. Although the assessee has paid advance money to the owners of the land, the land is in the name of the original owners. Hence, the registration of the sale deed of the land shows that the portion of land ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ea of one acre . On 06.05.2005, the building plans of three houses were approved. The total area of land on which these approved buildings is situated on is only 5988 sq. ft. When the same was brought to the notice of the assessee, it was submitted that the first three houses which were given for approval were prototypes and their approval can be considered as equivalent to obtaining approval for the whole project. According to the Assessing Officer, the approval on 06.05.2005 (for three houses) is on just 5988 sq. ft. of land and hence the housing scheme of the assessee is on an area of land less than one acre of land. 6. The Assessing Officer has further observed that the assessee had carried out the housing scheme on a land which has five layout approvals. If it is considered the date of the first layout approvals as the date of the first approval, that is, PPD/LO No. 99/2003 approved on 22/09/2003, then the assessee should have completed the housing scheme by 31/03/2008 which is not the case here. The assessee has completed the housing scheme only on 31.03.2011. 7. Further, it was observed that the assessee has added nearly double the amount of land to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... term built up area has been defined in sec. 80-IB(14)(a) to include the projections and the balconies. Thus the private terrace is nothing but the projection of the flat. It can also be termed as an open balcony and the private terrace is for the exclusive use of the purchaser. Once the private terrace is for the exclusive use of the purchaser of the flat then, obviously, the said private terrace does not fall within the common areas shared with the other residential units and consequently would have to be included in the measurement for arriving at the built up area . Therefore, the Assessing Officer came to a conclusion that the private terrace has to be considered as part of the built up area of 1500 sq.ft. by following the decision of the Tribunal in the case of Sanghvi and Doshi Enterprise (supra) and held that the assessee has violated the conditions laid down under section 80IB(10) with regard to built up area and disallowed entire claim of the assessee. 9. On being aggrieved, the assessee carried the matter in appeal before the ld. CIT(Appeals). 10. It was submitted before the ld. CIT(appeals) that The assessee is a developer and builde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p area is concerned, the assessee has submitted that the open terrace area cannot be included in the built up area for the purpose of deduction under section 80IB(10) of the Act. 11. The ld. CIT(Appeals), after considering the details submissions made by the AR of the assessee, has dealt with issue-wise raised before him. On the first issue before him, the ld. CIT(Appeals) has observed as under: The AO in his order has concluded that the project carried out by the appellant is not a housing project based on the reasons that the building plan approval was not obtained by the appellant for the project as a whole but was obtained individually for each housing unit, that the buyer of house gets a divided share of land which is not proportional to the built up area, that the house with same built up area has different areas of divided share in land and also sold at different price, that all the housing projects claiming deduction u/s.80-IB(10) should be similar, that the price of the housing unit would appreciate as the land is also sold along with the housing unit and that the buyer is given the discretion to modify the existing structure and therefore it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficial provision of section 80-IB (10), differentiating between 'scheme' and 'project' thereby treating the housing project executed by the appellant is not a housing project and therefore the appellant is ineligible to claim deduction under section 80-IB(10) is against the letter and spirit of the law. If this argument of the AO is accepted, then it shall nullify the very object of introducing the provisions of section 80-IB (10) for promoting housing activities in the country. In this connection reference to be made to the clarification of CBDT vide letter dt. 4th May, 2001 to Maharashtra chamber of housing Industry which clearly states that any project which is approved by the local authority for the purpose of construction of housing should be considered adequate for the purpose of Section 10(23) and 80-IB (10) of the Act. Therefore the conclusion of the AO that the housing project executed by the appellant is not in the nature of housing project as mandated by section 80-IB(10) is not acceptable, since the law is very clear on this issue that the approval granted to a building plan constitutes approval grant~ to a housing project. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ming party, that the appellant has commenced construction only after obtaining building plan approval and the final buyers were the real owners of the land on which the construction was done by the appellant. Therefore the appellant has acted only as a works contractor and concluded that he undertook only contract risk. Hence as per explanation appended to section 80- IB (10) of the Act, deduction under this section is not admissible to him. On having gone through the order of the AO and the submission of the AR of the appellant and carefully perused the entire records including the written statements and decisions of Hon'ble High court, Hon'ble ITAT and others and the guideline laid down in this regard. In the present case there is no dispute with regard to the fact that the appellant has developed the land and constructed the housing units; there is no dispute as to the fact that the appellant has entered into agreements for purchase of land by paying money to the land owners and possession was taken by him; there is no dispute with regard to the fact that other activities connected with the selling and marketing were done by him. It is also undeniable fact t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... called that the relevant explanation introduced by finance (No:2) Act 2009, w.e.f. 1-04-2009 to section 80-IB (10) which says for removal of doubts, it is hereby declared that nothing contained in this subsection shall apply to any undertaking which executed the housing project as a works contract awarded by any person (Including the central and state government) . Obviously, if any housing project has the works contract so awarded by any person including the central or state governments, the same would not be eligible for this deduction. In the light of the facts of this case stated herein above, the appellant in this case is a developer and a builder of the housing projects and I am of the view that the appellant has not been awarded any such contract work by the land owners or by the buyers of the housing units. Therefore the decision of the AO in denying the deduction u/s 80-IB (10) of the Act on the ground that appellant job is only that of works contract is not acceptable. In this connection attention is drawn to the decision of the Ahmadabad Bench of the Tribunal in Radha Developer ors Vs. ITO Others (2008) TTG (ahd) 300. The above decision of the Ahmadabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 80-IB (10) of the Act, I am convinced that, there is no dispute regarding purchase of lands measuring about 14.75 acres by the appellant and creation of all the basic common amenities and infrastructure to the housing project as a whole. If it had been individual houses as contended by the AO which was a standalone project this would not have been done. It is because all the individual houses formed part of the consolidated whole, like one single project. The appellant has provided the basic amenities and infrastructure. It is also pertinent to note that the local Panchayat board has passed a resolution to hand over the maintenance of the parks by the appellant which goes to show that the entire project is one whole project and not a combination of several projects. Therefore I am of the view that the appellant thus complied clause (b) of section 80-IB(10) of the Act which stipulated a minimum area of one acre of land to claim deduction under the said section. I am in agreement with AR of the appellant that the layout approval has no relevance for the purpose of determining the date of approval envisaged in section 80-IB(10) as it only confers the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he size of the plot of land but not the size of the housing project. The size of the plot, as per section 80-IB(10) must have minimum area of one acre. The section does not lay down that the plot having minimum area of one acre must be a vacant plot. Therefore, once the undertaking develops and construct housing project in an minimum area of one acre and getting building approval for construction of residential units from the local authority on various dates and completes the project within the time stipulated by the section 80-IB(10) would entitle the undertaking to claim deduction under section 80-IB(10). In fact, explanation in section 80-IB (10) supports the contention of assessee that approval granted to a building plan constitutes approval granted to a housing project. Therefore, it is clear that construction of even one building with several residential units or even one building with single dwelling unit of size not exceeding the stipulated sq.ft would constitute a housing project under section 80-IB(10). Though the appellant got building approvals on various dates the date of approval of the project has been taken on the date on which he has first obtained appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e referred to by the Assessing Officer, the Hon ble Members ITAT Chennai A Bench have stated that the terrace talked about is not the roof top terrace. Since in the appellant s case, the terrace referred to is the roof top of the ground floor, reliance cannot be placed on Sanghvi Doshi on this issue. In M/s. Sanghvi Doshi Enterprise case, what was constructed was apartments and the entire apartments constructed in the said project were subjected to approval and certification by competent authority viz CMDA or local authority, together with total built up area constructed in the entire project including common area. In this approval, the unit area of each individual apartment is not defined. To prevent this type of ambiguity, the legislature thought it fit to introduce the definition of Built up area of each individual unit. In the appellant's case, the approval is for each independent unit wherein, the local authority has clearly defined the built up area in their approval and the local authority after due inspection on completion of each independent unit, had issued a certificate stating that the entire construction of the particular unit has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant has furnished the built up area computation of ground floor as well as first floor totalling to 1465.03 sq.ft. and amply demonstrated that the built up area is well within the prescribed limit of 1500 sq.ft. and placed reliance on several case laws in support of the appellant wherein it was held that the open terrace will not form part of the built up area. In the case of the appellant the open terrace area included in the built up area by the AO is neither a projection nor a Balcony of the rooms of the first floor but it is only a ceiling of the rooms already taken into built up area of the ground floor. The term balcony has been defined in different dictionaries, which reads as under: a. (Arch.) A platform projecting from the wall of a building, usually resting on brackets or consoles, and enclosed by a parapet; as a balcony in front of a window. Also a projecting gallery in places of amusements; as, the balcony in a theater. [1913 Webster] b. (1): an upper floor projecting from the rear over the main floor in an auditorium (2) a plotform projecting from the wall of a building and surrounded by a balustrade or railin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n terrace area are not to be included in the built up area and in the instant case once the open to sky area is removed, the built up area of individual building units is well below 1500 sq.ft. and therefore the appellant is eligible to claim deduction u/s. 80IB(10) of the IT Act. Keeping in view of the judicial decisions and several court cases held in favour of the appellant I am in agreement with the contention of the AR of the appellant and found that the AO is not justified in adding open terrace area to the built up area and make the entire housing project ineligible to claim the deduction u/s. 80IB(10) of the IT Act on the ground that the total built up area exceeded 1500 sq.ft. as prescribed u/s. 80-IB(10) / 80-IB(14)(a) of the IT Act. Therefore I am of the view that the appellant has adhered to the condition stipulated regarding the built up area. In view of the fulfillment of all the conditions stipulated u/s. 80IB(10) of the I.T Act as discussed above and in keeping in view of the various judicial decisions cited in favour of the appellant, the AO is directed to allow the deduction claimed u/s.80-IB(10) of the IT Act to the appellant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is concerned, the ld. Counsel for the assessee has submitted that the issue involved in this appeal is covered by the decision of the Hon ble Jurisdictional High Court in the case of CIT v. Sanghvi and Doshi Enterprise (2013) 255 CTR 156, which was objected by the Assessing Officer. On this issue, the ld. Counsel for the assessee has placed reliance in the case of CIT v. Mahalakshmi Housing (2012) 83 CCH 258 Chennai in T.C.A. 586 of 2011 and 318 of 2012. 18. We have heard both sides, perused the materials on record and also gone through the orders of authorities below. The assessee is an individual, who is a civil and structural engineer. We find from the record that the assessee has conceived housing project and approached the land owners at Pallikaranai. The assessee, initially, entered into an agreement dated 15.06.2004 for a lay out approved by the CMDA to the extent of 7.11 acres of land and paid an advance of ₹ .86,05,000/-. After that the assessee had developed infrastructure facilities like roads, parks, play ground area by incurring an expenditure of ₹ .79.27 lakhs and thereafter negotiated with prospective buyers and constructed independent houses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indu 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, (viii) The undertaking commences development and construction of the housing project on or after 01.10.1998 and the housing project is completed by following dates: (a) in a case where a housing project has been approved by the local authority before 01.04.2004, it should have been completed on or before 31.03.2008; (b) in a case where the housing project has been, or, is approved by the local authority on or after 01.04.2004, but not later than 31.03.2005, it should complete within four years from the end of the financial year in which the housing project is approved by the local authority; (c) In a case where the housing project has been approved by the local authority on or after 01.04.2005, it should be completed within 5 years from the end of the financial year in which the housing project is approved by the local authority [inserted by the Finance Act, 2010 w.e.f. assessment year 2010-11] 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... land having an area of minimum 1 acre or not. The size of the plot, as taken by the assessee, is 7.11 acres and after developing roads, parks, play area, etc. the left over area for construction of the house is 3.675 acres. Therefore, the Assessing Officer was not correct in saying that the housing project is not on a plot of 1 acre area. The assessee has taken 3 prototype houses and got it approved from the local authority and on the basis of that the assessee has pursued prospective buyers and entered into an agreement for construction as well as selling of the land and completed the housing project. The method adopted by the assessee is according to his business convenience and in our opinion, the housing project is on the size of plot of land having more than 1 acre and therefore, on this account, the benefit available under section 80IB(10) cannot be denied and the ld. CIT(Appeals), after discussing in detail has held that the housing project constructed by the assessee is in 1 acre of land and we find no reason to interfere with the order of the ld. CIT(Appeals). Accordingly, the issue raised by the Revenue stands dismissed. 22. In so far as CMDA approval is conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficate was obtained from the Pallikaranai Panchayat on 03.03.2011. The ld. CIT(Appeals), after considering the entire facts of the case, has observed that though the assessee got approval of building on various dates, the date of approval of the building was taken on the date on which he has obtained first approval for construction of 3 prototype houses. However, the building plan approvals for the remaining houses have also been obtained before 31.03.2008 as required by section 80IB(10) and all these dwelling units in the project were completed and completion certificate was obtained on 03.03.2011 as required by clause (a) of section 80IB(10) . By following the decision of the Hon ble Bombay High court in the case of CIT v. Vandana Properties 353 ITR 36 (Bom). The Hon ble Bombay High Court has observed in para 22 in respect of Explanation to section 80IB(10)(a), which was introduced w.e.f. 01.04.2005 that what the said Explanation contemplates is that where the approval in respect of a housing project is granted more than once, then, that housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a developer or works contractor. The assessee initially entered into an agreement with 17 land owners to the extent of land in 7.11 acres and paid an advance of ₹ .86,05,000/- and developed the roads, parks, play area, street lights, etc. by incurring an amount of ₹ .79.20 lakhs and pursued prospective buyers and negotiated with them and thereafter sold the land and constructed independent houses. So, the assessee has taken an investment risk and also developed the area. Therefore, the assessee is a builder and developer and not a contractor. The contractor is a person undertakes to do a particular work. In this case, the assessee has not taken any simple construction work. The assessee has conceived the project, developed all necessary infrastructure facilities and constructed independent houses and completed the project well within the time as stipulated under the Act. The ld. CIT(Appeals) has dealt with this issue at page Nos. 29 to 32 elaborately in support of various case law and also held that the project executed by the assessee was not of the nature of works contract and the assessee undertook investment risk. Therefore, we find no infirmity in the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egard to built up area. In the assessment order, the Assessing Officer has noted that if private terrace is included in the built up area, it exceeds more than 1500 sq.ft. and therefore, the assessee is not eligible for deduction under section 80IB(10). Further, he has relied on the decision of ITAT Chennai Bench in the case of Sanghvi and Doshi Enterprise. The ld. CIT(Appeals) in his order at page Nos. 36 to 39 has meticulously calculated the built up area. According to the ld. CIT(Appeals), the total built up area of each residential unit is 1465.03 sq.ft. He has observed that there is nothing built and it is an open space, such space cannot be included in the built up area without a specific provision in that regard. Therefore, he has held that open terrace is not to be included in the built up area and accordingly, the claim of the assessee was to be allowed. At the time of argument, the ld. DR has pointed that open terrace should be included in the built up area and the same was considered by the Tribunal in the case of Sanghvi and Doshi Enterprise, the same very ITAT order has been followed by the Assessing Officer. We find that the same issue has came up for consideration be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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