TMI Blog2019 (7) TMI 77X X X X Extracts X X X X X X X X Extracts X X X X ..... duction u/s.80IB(10) on the basis of inaccurate measurement of built up area of four flats - HELD THAT:- We direct the AO to verify the workings to be given by the assessee in terms of sq.ft to ensure whether the aforesaid four flats after excluding the terrace garden area fall within the limits of 1500 sq.ft. Respectfully following the aforesaid judgement and in view of the aforesaid directions, we deem it fit to remand this issue to the file of the AO to decide the same in the light of the aforesaid decision and in light of the aforesaid directions. Accordingly, the ground raised by the assessee is allowed for statistical purposes for A.Y.2010-11. Not allowing claim of write off of sundry balances - HELD THAT:- AR merely made an oral submission that these advances were made in the course of business and the same had become irrecoverable which eventually lead to write off of the same by the assessee during the year. Apart from this oral submission, he could not substantiate his arguments by way of any evidences. Hence, we do not deem it fit to interfere in the order of the CIT(A) in this regard, accordingly, the ground No.2 raised by the assessee for the A.Y.2010-11 is dismi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 80IB(10) on the basis of following: the parking space cannot be aniIntegral part of a housing project. Even if it is an integral part of the housing project, it cannot be an integral part of the residential unit. Further, in conclusion, 'it cannot be a part of the deduction u/s 80IB (10) of Income Tax Act 1961, which is available for a housing project, the residential unit of 'which can't exceed maximum built up area of one thousand and five hundred square feet in Kolkata.. It cannot be ignored that the 'locus' of deduction u/s 80IB(10) of\the Income Tax Act 1961 is the residential unit and is subject to fulfillment of conditions u/s 80IB(I0). In a recent judgment the Apex Court has held that sale of stilt parking area by the builders and promoters are illegal in the State of Maharashtra, .Therefore If such sale is not permitted by law, then on what grounds it can be claimed that profits from such sales are deductible. Therefore profit from sale of Car Parking area is held not to be eligible for deduction u/s 80IB(10) 3.1. The assessee pleaded that the car parking has been allotted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2. Accordingly, it was argued that assessee is entitled for deduction in respect of profits derived from sale of car parking or by treating the same as part and parcel of the entire housing project which is eligible for deduction u/s.80IB(10) of the Act. It was specifically pointed out that there was no independent / separate sale of car parking space alone without the residential unit being sold. In other words, the car parking space is linked with the concerned residential unit and sold as a package to the buyers. The assessee also placed reliance on various Mumbai Tribunal decisions in support of its contentions. The ld. CIT(A) by placing reliance on the decision of Hon ble Jurisdictional High Court in the case of Paramount Projects Ltd., in ITA No.4975 of 2010 and 4977 of 2010 and certain other Mumbai Tribunal decisions wherein it was held that profit derived from sale of car parking space is an integral part of the housing project and accordingly eligible for deduction u/s.80IB (10) of the Act. 4. Aggrieved, the revenue is in appeal before us. 5. We have heard the rival submissions. At the outset, we find that the ld. CIT(A) had placed rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Tribunal in holding that assessee is entitled to deduction u/s.80IB in respect of housing project inclusive of the amount received on account of car parking cannot be faulted. 3.5. Reference is also drawn to various case laws referred by the Ld. AR of the appellant in his submission, where it was held that car parking is an integral part of housing project which is eligible for deduction u/s.80IB. In the case of ACIT vs. M/s. Vaman Estate ITA No.7570/Mum/2011 (Order dated 19.10.2012) the Hon ble ITAT has held that deduction u/s.80IB(10) is available on income from car parking spaces. The relevant para of the order of the Tribunal is quoted below:- We have Carefully considered the submissions of the rival parties and perused the material available on record. We find merit in the plea of the Ld. 'assessee that the issue is squarely covered in favour of the assessee by the Tribunal in assessee 's own case. The Tribunal in ITA No.3016/Mum/2008 for AY 2004-05 dated 28.10.2009 has held vide para 12 of the order as under:- As regards ground No. of the revenue, relating to the income from car parking spaces, we agr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kara Projects Limited and of ITAT in case of Vaman Estate it is held that the AO was not right in law-deduction u/s SOIB(IO) on income from sale of car Parking. Hence the AO is directed to grant deduction of ₹ 11,75,76,285/-u/s.80IB(10) in respect of income from sale of car parking. The ground No.2 of the appeal is allowed. 6. From the aforesaid elaborate observations of the ld. CIT(A), we do not deem it necessary to interfere in the said findings of the ld. CIT(A) and the issue is also decided in favour of the assessee by the decision of Hon ble Jurisdictional High Court, supra. Accordingly, the ground No.1 raised by the revenue is dismissed. 7. The next issue to be decided in the appeal of the revenue for A.Y.2009-10 is as to whether the ld. CIT(A) was justified in allowing relief to the assessee in respect of carry forward of short term capital loss of ₹ 6,06,15,410/- in the facts and circumstances of the case. 8. We have heard rival submissions. At the outset, we find there is absolutely no discussion by the ld. AO relating to this carry forward of short term capital loss of ₹ 6,06,15,410/- in his entire asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished by the assessee company. From the perusal of the details, the ld. AO observed that in respect of 73 parties, the assessee had sold flats along with utility rooms wherein the total area had exceeded the limit of 1500 sq. ft which had resulted in violation of provisions of Section 80IB(10)(c) of the Act. Accordingly, the ld. AO sought to disallow the deduction u/s.80IB(10) of the Act in respect of said 73 parties in the housing project. The ld. AO also observed that the total receipts from such sale of flats and utility rooms was ₹ 32,56,33,441/- and the cost of such sales was ₹ 26,39,35,183/-. The profit of ₹ 4,05,48,257/- being the profit from sale of flats with utility rooms exceeding 1500 sq.ft was not eligible for deduction u/s.80IB(10) of the Act. The assessee submitted before the ld. CIT(A) as under:- That the learned. AO erred in disallowing a sum of ₹ 4,05,48,357/- being, profit from residential units with utility rooms having, aggregate area exceeding 1500 sq.ft while determining deduction, allowable u/s. 80IB(10). As per the Kolkata Municipal Corporation Rules , and National Building Code these utility room ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aim of ₹ 4,05,48,257/- under section 80IB(10). The ground no. 3 is, therefore, dismissed. 18. Aggrieved the assessee is in appeal before us. 19. We have heard rival submissions. We find that the ld. DR vehemently argued the intention behind introduction of grant of deduction u/s.80IB(10) of the Act that by stating that the same is meant for middle class under affordable housing category and that the said deduction should be strictly construed. The utility rooms in the instant case is nothing but servant quarters. The ld. DR vehemently argued that whether the servant quarter is separated from the main residential unit or attached together is of no relevance at all, in as much as, the said servant quarter (utility room) cannot be sold independently to any outsider other than the person who purchases the residential unit in the housing project. In the instant case, these 73 flats which were sold together with utility rooms had indeed exceeded 1500 sq. ft thereby violating the requirements of 80IB(10)(c) of the Act and the ld. AO had rightly denied deduction to the assessee proportionately, only in respect of these 73 units. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the ld. DR placed reliance on the decision of Hon ble Karnataka High Court in the case of CIT Anr. Vs. Raghavendra Constructions reported in 354 ITR 194 (Kar). The operative portion thereon is reproduced hereunder: 8. Therefore, the intention is clear. In calculating the built-up area it is only the inner measurements of the residential unit on the floor level, which have to be taken into consideration. If there are any projections and balconies and if it exclusively belongs to the residential units, then, that also has to be taken into consideration for deciding the built-up area. However, if the said residential unit is provided the facility of common areashared with other residential units such common areas have to be excluded while computing the built-up area. The language employed in defining the built-up area as the common area shared with other residential units, it does not mean that every common area should be shared with other residential units. If that area does not exclusively belong to the owner of the residential unit and if he has to share that common area with the owner of another residential unit, then that common area ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nto account inner measurements of the 73 residential units plus their respective servant quarters, the total expenditure exceeded 1500 sq. ft thereby leading to violation of 80IB (10(c) of the Act. Hence, we hold that the ld. AO had rightly denied deduction u/s.80IB(10) of the Act to the extent of utility rooms (servant quarters) in the sum of ₹ 4,05,48,257/-. Accordingly, ground No.1 raised by the assessee is dismissed. 20. Ground No.2 raised by the assessee for A.Y.2009-10 is general in nature and does not require any specific adjudication. 21. In the result, the appeal of the assessee in ITA No. 1543/Kol/2014 is dismissed. 22. Let us take up assessee appeal for the A.Y.2010-11 in ITA No.1544/Kol/2014. The first issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in not allowing deduction u/s.80IB(10) of the Act in the sum of ₹ 143,05,014/- on the basis of inaccurate measurement of built up area of four flats. 23. The brief facts of this issue are that the ld. AO from the list of flats furnished by the assessee company in respect of its residential project at 61, B.L. Shah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26. Before the ld. CIT(A), the assessee stated that it is very clear in the valuation report issued by the Divisional Valuation officer that the site in question was inspected on 18/02/2013 but entry was denied into any of the flats for making the measurement. Accordingly, the Valuation Officer had managed to measure the terrace floor of the relevant flat types from which it is not possible to calculate the exact built up area of any typical flat. It was also pointed out that the Valuation Officer while calculating the built up area from terrace had also included the area of terrace garden which is incorrect. To summarize, the assessee pleaded before the ld. CIT(A) that the valuation report to the Divisional Valuation Officer cannot be relied upon for the following reasons:- (i) Physical verification was not carried out properly on the relevant flats in respect of its disallowance has been made. (ii) The Valuation Officer has himself stated that exact built up area could not be calculated from the terrace. (iii) Terrace garden area has also been included in the calculation of built up area of rooms. 27. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with other residential units. He argued that the terrace is outside the inner measurement and it cannot be taken in the calculation of built up area. The inner measurement of a residential unit should only be taken for calculation of built up area. The built up area of each unit is within 1500 sq.ft. He further argued that as per the National Building Code of India, the definition of Plinth Area and Covered Area are given separately which also supports the above fact. For the sake of convenience, the relevant portion of National Building Code of India is reproduced herein below:- 2.65 Plinth Area-The built up covered area measured at the floor level of the basement or any storey. 2.26 Covered Area- Ground area covered by building immediately above the plinth level. The area covered by the following in the open spaces is excluded from covered area. a) Garden, rockery, well and well structures, plant nursery, waterpool, swimming pool (if uncovered), platform round a tree, tank, fountain, bench, CHABUTRA with open top and unenclosed on sides by walls and the like; b) Drainage culvert, c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulated on an actual basis and not on the basis of estimates. In that case, the AO relied on a ratio worked out from the map attached with the occupancy certificate, for arriving at the built up area from the carpet area which was turned down by the Tribunal. 4.2.3. We also find lot of force in the alternative arguments of the Learned AR that the term terrace is not defined in the Act. However the word terrace originates from a French term and is known as terrasse, terrazzo in Italian and spelled as terraza in Spanish. This is an outdoor extension that can be occupied by lots of people and is beyond ground level. A terrace has more space and with an open-top. We find that the definition of built up area means inner measurement 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. Hence it could be concluded that the open terrace is not covered within the meaning of built up area as it is open to sky and would not be part of the inner measurement of the residential floor at any floor level. Reliance in this regard is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80- IB(10) of the Act and that the assessee would be entitled to proportionate relief as regards the units having built up area not more than 1500 sq.ft. 7. Even though learned standing counsel for the Revenue raised additional grounds regarding the principle of proportionality for grant of relief, yet, we find by reason of exclusion of open terrace area from the built up area, application of proportionality theory does not arise. In the circumstances, we find no justifiable ground to accept the plea of the Revenue on this aspect. 8. As far as the Revenue s contention that for the purpose of Section 80- IB(10} deduction, the assessee should have owned the property is concerned, the same is liable to be rejected by reason of our decision rendered in T.C.Nos. 581, 1186 of 2008 and 136 of 2009 - CEEBROS HOTELS PVT LTD v. DEPUTY COMMISSIONER OF INCOME TAX dated 19.10.2012. Hence, the appeals filed by the Revenue viz., T.C. (A). Nos. 583 and 584 of 2011 stands dismissed and this portion of the Tribunal's order stands confirmed. The assessee's appeals in T.C.Nos.316 and 317 of 2012 stand allowed, holding that the terr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prior to 01.04.2005 i.e. prior to the date when the definition of 'built-up area' was brought on the statute by way of section 80IB(14)(a) of the Act. 20. We have carefully perused the judgement of the Hon'ble Madras High 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 801B(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. 21. Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble High Court, terrace area would not form part of the built-up area by the reason of the fact that assessee sold it to the purchaser as a private terrace. At this stage, we may also point out that there is nothing in section 80IB(14)(a) of the Act to suggest that the factum of the terrace being available for exclusive use 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. 4.2.6. In view of the aforesaid judicial precedents, the terrace area needs to be excluded from the built up area and if the same is excluded , then the resultant built up area is well within the 1500 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that these advances were made in the course of business and the same had become irrecoverable which eventually lead to write off of the same by the assessee during the year. Apart from this oral submission, he could not substantiate his arguments by way of any evidences. Hence, we do not deem it fit to interfere in the order of the ld. CIT(A) in this regard, accordingly, the ground No.2 raised by the assessee for the A.Y.2010-11 is dismissed. 37. Ground No.3 raised by the assessee was stated to be not pressed at the time of hearing by the ld. AR. The same is reckoned as a statement from the Bar and accordingly, the ground No.3 is dismissed as not pressed. 38. Ground No.4 raised by the assessee is general in nature and does not require any specific adjudication. 39. In the result, appeal of the assessee in ITA No.1544/Kol/2014 for A.Y.2010-11 is partly allowed for statistical purposes. 40. TO SUM UP:- AY APPEAL BY ITA NO. RESULT 2009-10 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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