The order of the Bench was delivered by
SHRI M.BALAGANESH, AM-This appeal of the assessee arises out of the Order of the Learned CIT(A)-XIX, Kolkata in ITA No.446/CIT(A)-XIX/Ward-33(1)/Kol/12-13 dated 21-10-2013 for the assessment year 2010-11 against the order of assessment framed by the Learned AO u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).
2. The only issue to be decided in this appeal is as to whether the assessee is entitled for deduction u/s 80IB(10) of the Act in the facts and circumstances of the case.
3. The brief facts of this issue are that the assessee is engaged in the business of construction and sale of flats by developing and building Housing Projects. The assessee had undertaken a housing project styled as Ashiana Amarbagh Jodhpur, in Phase –I, stituated at Village -Kudi Bhagtasani, Jodhpur Pali Road, Jodhpur – 342001, Rajasthan. The assessee claimed deduction u/s 80IB(10) of the Act in respect of profits derived from this housing project. The Learned AO observed that the assessee filed audit report in Form 10CCB, copy of completion certificate from the Architect, project layout, project brochure giving area details of the residential units, possession letter copies, accounts for the project along with other details. The Learned AO disallowed the deduction claimed by the assessee u/s 80IB(10) of the Act on the following three grounds :-
Completion certificate of building has not been obtained by the assessee from local authority but instead obtained only from an Architect thereby violating the provisions of Explanation (ii) to section 80IB(10)(a) of the Act ;
Size of residential units is more than 1500 sq.ft including the terrace area thereby violating the provisions of section 80IB(10)(c ) of the Act ;
Built up area of commercial establishment included in the project is higher than 3% of the aggregate area and more than 5000 sq.ft thereby violating the provisions of section 80IB(10)(d) of the Act.
The action of the Learned AO was upheld by the Learned CITA. Aggrieved, the assessee is in appeal before us on the following grounds:-
1) That on the facts and in circumstances of the case and in law, the CIT(A) has erred in \ confirming the disallowance made by the A.O. for deduction claimed by the appellant under the provisions of section 80- IB(10) of the Income Tax Act, 1961 for the previous year relevant to the assessment year under consideration. The observation of the learned CIT(A) in this regard is wrong and misleading.
2) That on the facts and in circumstances of the case and in law, the CIT(A) has erred in disallowing the deduction claimed u/s 80-IB(10)(a) of the Act on the alleged ground that the appellant had not obtained the completion certificate from the local Authority whereas the appellant had duly fulfilled the condition stated in the aforesaid section of the Act. The CIT (A) had erred in neglecting the certificate issued by the local Authority and confirmed the addition made by the Assessing Officer without considering the full facts of the case. The appellant denies the observation and findings of the learned CIT (A).
3) That on the facts and in the circumstances of the case, the CIT (A) has erred in confirming the disallowance made by the A.O. for the deduction claimed by the appellant u/s 80-IB (10)(c) on the ground that appellant has violated the restrictions of the built up area of the residential units which should be maximum at lS00 square Feet at places other than cities of Delhi and Mumbai. The CIT(A) has wrongly confirmed the re-calculation of the built up area made by the A.O. without considering the full facts of the case. The disallowance made by the CIT(A) on this ground is not correct and misleading the fact of the case.
4) That on the facts and in the circumstances of the case, the CIT (A) has erred in confirming the addition made by the A.O. u/s 80-IB(10)(d) of the Act on the alleged ground that the appellant has violated the conditions stated in clause(d) of sub-section(10) of section 80-18 in relation to built-up area of the shops and other commercial establishments included in the housing project exceeding the specified percentage of the built up area of the residential project when the appellant has duly fulfilled the conditions stated in the said Act. The observation of the learned CIT(A) on this ground is not correct and misleading the fact of the case.
5) That on the facts and in the circumstances of the case, the CIT(A) has erred in confirming the interest levied by the Assessing Officer under the provisions of section 234B of the Act.
6) That the appellant craves leave to add any additional grounds and / or amend, alter, modify or rescind the grounds herein above before or at the hearing of the appeal.
4. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We feel that each of the issue based on which the revenue had rejected the claim of deduction u/s 80IB(10) of the Act needs to be addressed independently as below:-
4.1. Completion certificate not obtained from local authority as contemplated in section 80IB(10) of the Act
The Learned AR argued that the assessee after completion of construction of Phase I and Phase 1A of the project had applied for completion certificate to Jodhpur Development authority, the local authority, who is in charge of issue of such certificate. In reply to the said application, the said authority informed the assessee that completion certificate is issued to such buildings which are above than 15 meters in height and stated that for official purposes, a certificate from registered architect would suffice. Accordingly the assessee sought to obtain a completion certificate from a Registered Architect. It would be pertinent to reproduce the letter of Jodhpur Development Authority addressed to the assessee expressing their inability to issue the completion certificate for the housing project of the assessee as below:-
“Office of Jodhpur Development Authority, Jodhpur
Serial no. – 1624
Date 9/12/10
Ashiana Amar Developers
Pali road Jodhpur,
Subject : In respect of issuance of a Completion Certificate
Ref : Your letter dated 18.02.2010 & 14.06.2010
You have requested for issuance of Completion Certificate in respect of the Residential Project, Ashiana Amar Developers Phase- 1 and lA vide your letter dated 18.02.2010 and 14.06.2010.
With reference to your above mentioned letters, it is intimated to you that as per Rule 16 of the housing bye-laws, the provision of granting of "Completion Certificate" is in respect of construction of houses having. height of above 15 metres.
As per your letter, since the height of the houses constructed in your residential project is less than 15 metres, the same does not fall within the purview of the requirement of the issue of "Completion Certificates" as provided in the housing bye-laws.
Thus, there is no necessity to issue Completion Certificate for your Residential Project. If you want, you can obtain a Completion Certificate from a Registered Architect or Engineer.
Executive Engineer (South)
Jodhpur Development Authority
Jodhpur”
4.1.1. We find that the Registered Architect had indeed given the completion certificate vide letter dated 18.2.2010 which is reproduced below:-
“Biswajit Sengupta. architect
b.arch.fiia.,aiiid
ph-9887488263
01493-515305
A 305,Block 2, RANGOLI, Ashina Village
Bhiwadi 301019, Alwar, Rajasthan
Email: ahfil_sen@yahoo.com
Dated 18 Feb 2010
Ashina Amar Developers
Village Kuri Bhagtasani,
Jodhpur Pali Road,
Jodhpur-342001
Sub: Completion Certificate of Phase I, Ashiana Amerbagh, A Housing Project of Ashina Amarbagh Developers At Village Kuri Bhagtasani, Fatwar Jhalamand, Tehsil & District Jodhpur, Rajasthan
This is to verify that construction of Phase I of Ashiana Amarbag comprising of 95 dwelling units bearing no. E-16 to E-30, N-01 to N-08, N-35 to N-50, N-77 to N-84, S-01 to S-12, S-36 to S-59, S-86 to S-97 situated at Village Kuri Bhagtasani, Patwar Jhalamand, Tehsil & District Jodhpur, Rajasthan have been completed in all respect as per approved drawing & as per norms of Building Bye Laws.
This is to further certify that the project Ashiana Amarbagh, Phase I is fit for residential use with all facilities.
Sd/-
Biswajit Sengupta
Regd Architech: CA/75/886
BISWAJIT SENGUPTA
B.Arch., P/IA.
Regd. Architect CA/7B/BBC”
4.1.2. It would also be pertinent to reproduce the bye laws of Jodhpur Development Authority which has been placed on record by the Learned AR wherein it has been stated as under:-
“15. Completion certificate :-
15.1 On completion of building having a height of more than 15 metres, the builders has to obtain a completion certificate. The said certificate will be given by the competent Authority only after necessary verification and according to the following procedures. “
4.1.3. We find from the above correspondences that the assessee had duly applied for the completion certificate from Jodhpur Development Authroity (i.e local authority) as per the condition laid down in section 80IB(10) of the Act immediately after completion of the project. However, the said authority instructed the assesssee to take the completion certificate from a registered architect for official purposes. Hence in this scenario, the Learned AO insisting on the certificate from local authority would only result in impossibility of performance on the part of the assessee. The well known legal dictum LEX NON COGIT AD IMPOSSIBLIA (i.e the law cannot compel a man to perform an act which he could not possibly perform) which has been given due credence by the Hon’ble Supreme Court in the case of Krishnaswamy S. Pd.& Anr. Vs Union of India & Ors reported in (2006) 281 ITR 305 (SC) , wherein it was held that the maxim actus curiae neminem garvabit, i.e ., an act of court shall prejudice no man , is founded upon justice and good sense which serves a safe and certain guide for the administration of law. The other relevant maxim is lex non cogit ad impossiblia – the law does not compel a man to do what he cannot possibly perform. The law itself and its administration is understood to disclaim as it does in its general aphorisms, all intention of compelling impossibilities, and the administration of law must adopt that general exception in the consideration of particular cases.
4.1.4. Reliance is placed on the decision of Hon’ble Gujarat High Court in the case of CIT vs Tarnetar Corporation reported in (2014) 362 ITR 174 (Guj) wherein it was held that :
It is equally true that Explanation to Clause (a) to section 80IB(10) of the Act links the completion of the construction to the Building Use Permission being granted by the local authority. However, not every condition of the statute can be seen as mandatory. If substantial compliance thereof is established on record, in a given cases, the court may take the view that minor deviation thereof would not vitiate the very purpose for which the deduction was being made available.
4.1.5. Reliance is also placed on the decision of Hon’ble Karnataka High Court in the case of CIT vs Ittina Properties (P) Ltd in ITA No. 556 of 2013 dated 15.7.2014 , wherein it was held that :
6. One of the project has been sanctioned subsequent to the Act. The point of controversy is regarding the date on which the project was completed to be eligible for the benefit of the said provision. The revenue contends, the completion certificate issued by the Village Panchayat is not valid and therefore the assessee is not entitled to the said benefit. Admittedly the plan is sanctioned by the BDA. The BDA has not issued any completion certificate. The reason being, in the BDA Act or the Karnataka Municipal Corporation Act, there is no provision for issue of completion certificate. The provision in the Karnataka Municipal Corporation Act is for issuance of occupancy certificate. When the statute does not provide for issue of a completion certificate, if the authorities were insisting on such certificate, the assessee has gone to the Vilalge Panchayat within whose limits the property is situated and has obtained the completion certificate and has produced the same for availing the benefit. Whether that certificate would satisfy the requirement of law need not be gone into in these proceedings because, when the statute does not provide for issue of such a certificate, if the revenue insists on such certificate, the assessee would be left with no option except to get such certificate with some authority which would be called as a local authority. In the facts of this case, we are of the view that the Tribunal has recorded a finding that the building was completed within the stipulated period and therefore de hors this certificate issued by the Panchayat after the building is completed, the assessee is entitled to the said benefit. In that view of the matter, we do not see any merit in these appeals. Accordingly, the appeals are dismissed.
8. It is unfortunate that when the Parliament has extended the benefit of exemption from payment of Income Tax to a builder who undertakes group housing activity, the department is not willing to extend the benefit on the pretext that the production of completion certificate is a condition precedent for extending the benefit. Neither under the BDA Act nor under the Karnataka Municipal Corporation Act nor under the Karnataka Municipalities Act, there is any provision for issuance of a completion certificate. There is a provision for sanction of a plan, issue of a licence, issue of a commencement certificate and issue of an occupancy certificate. In those circumstances, if the Revenue were to insist on production of a completion certificate, they are asking the assessee to do something which is impossible and which is not proper in law. It is high time the Revenue, keeping in mind the relevant law governing the State of Karnataka, would suitably amend the law or issue appropriate circulars enabling the assesses to comply with the legal requirement so that they could have the benefit extended to them by the Parliament.
4.1.6. It is also not in dispute that the project was completed within the allotted time frame and possession certificates were also duly furnished before the Learned AO. In view of the aforesaid findings and judicial precedents relied upon, it could be safely concluded that expecting the assessee to produce the completion certificate from a local authority would only result in impossibility of performance on the part of the assessee. Accordingly, the rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order.
4.2. Built up area exceeding 1500 sq.ft including terrace area
We find that the meaning of the term ‘built up area’ is given in section 80IB(14)(a) of the Act as under :
‘built up area’ means the inner measurements of the residential unit at the floor level, including the projection and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units.
The Learned AR argued that the areas such as lobby, staircase, terrace, etc are not included while measuring built up area of a residential unit. The super built up area is inclusive of built up area and other common facilities shared 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, conduit, catch-pit, gully pit, chamber, gutter and the like;
c) Compound wall, gate, unstoreyed porch and portico, canopy, slide, swing, uncovered staircase, ramps areas covered by CHHAJJA and the like; and
d) Watchmen’s booth, plumphouse, garbage shaft, electric cabin or sub-stations, and such other utility structures meant for the services of the building under consideration.
NOTE- For the purpose of this Part, covered area equals the plot area minus the area due for open spaces.”
4.2.1. We find that the Learned AO during the course of assessment proceedings asked the assessee inter alia to submit before him the copies of brochure issued by the assessee to the prospective buyers for effecting the sale of residential units during the asst year under appeal. The assessee duly made available the copies of the brochure issued in order to attract prospective 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 assumptions and estimates.
4.2.2. Reliance is placed on the co-ordinate bench decision of Mumbai Tribunal in the case of ACIT vs Sheth Developers reported in 33 SOT 277 (Mum) wherein it was held that the built up area has to be calculated 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 made on the decision of the co-ordinate bench of Ahmedabad Tribunal in the case of Amaltas Associates vs ITO reported in 131 ITD 142 (AHD.) wherein it was held that the definition of built up area is inclusive of balcony but not open terrace. It further held that DVO has considered the open terrace as analogous to balcony / verandah without any basis. Therefore, it took the view that the authorities below were not justified in taking the open terrace as balcony / verandah rejecting the claim of the assessee.
4.2.4. Reliance in this regard is placed on the decision of Hon’ble Madras High Court in the case of CIT vs M/s Mahalakshmi Housing in Tax Case (Appeal) Nos. 583 & 584 of 2011 and 316 & 317 of 2012 dated 2.11.2012, wherein the questions raised before their Lordships and the decision rendered thereon are as under:-
Whether on the facts and circumstances of the case, the Appellate Tribunal is right in law in holding that the private terrace area should be included in the 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 open terrace area cannot form part of the built up area; in the result, the assessee would be entitled to deduction under Section 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 terrace area . No costs.”
4.2.5. Reliance is also placed on the decision of the co-ordinate bench decision of Pune Tribunal in the case of Shri Naresh T. Wadhwani vs DCIT in ITA No.s 18, 19 & 20 /PN/2013 for Asst Years 2007-08,2008-09 & 2009-10 dated 28.10.2014, wherein it was held that :-
“ 18. A bare perusal of the aforesaid question of law before the Hon'ble Madras High Court would reveal that the issue related to whether open space of the terrace would fall within the expression 'built-up area'. The facts before the Hon'ble High Court were that assessee had constructed various apartment blocks and each block had 64 apartments. The apartments located at first to sixth floor were of areas less than 1500 sq.ft.. However, the flats located on the 7th floor had the advantage of exclusive open terrace. While considering the relief u/s 801B(10) of the Act, the Assessing Officer took into consideration the area of such exclusive/private open terrace as a part of the built-up area of the units located at the 7th floor. After considering the above aspect, the builtup area of the flats located at the 7th floor 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 local authority 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. 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 area into the calculation of 'built-up area'. Before us also, the learned CIT-DR has raised the said issue though she has fairly conceded that such a finding was not emerging from the orders of the lower authorities. Be that as it may, the Hon'ble High Court has noted and dealt with the said argument in the following words ;-
'29. Thus, in the face of terrace being an open area, not being a projection and hence, not included in the plinth area, the question herein is as to whether the Tribunal is justified in confirming the order of assessment to include the terrace area into the built-up area solely by reason of the fact that the assessee had sold it to purchasers of the 7th floor as a private terrace.
30. We do not think, the Tribunal is justified in taking the view that open terrace would form part of the built-up area for the purpose of sub-clause (c) of section 80-IB(10). As already seen in the preceding paragraphs, an assessee having an Approved Plan 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 builtup 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 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-OR 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 sq.ft limit prescribed in the statute and hence rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order.
4.3. Commercial area in the project is more than 3%
The Learned AR argued that as per the sanctioned plan, the total area is sanctioned by the local authority is 69.12 bighas. Out of this , the assessee herein has only 58 bighas of land for construction and for the balance 11.12 bighas of land, M/s Miras Properties Pvt Ltd has entered into a separate partnership agreement with another firm. He argued that in assessee’s project land of 58 bighas, there are no commercial establishments as can be seen in the demarcated plan attached with the agreement.
4.3.1. We find from the Partnership Deed dated 27.2.2007 entered into between Miras Properties Pvt Ltd, Narayan Ladha, Suresh Kewlani , Sunil Talwar , Harish Talwar and Ashiana Housing and Finance India Limited , the following expressions assume greater significance :-
“the Firm” means the partnership firm hereby formed by the parties hereto and named as “Ashiana Amar Developers”.
“the Project” means the residential colony to be developed and marketed on the Project Land and more fully described in Article 5.0 hereunder.
Article 5.0 – PROJECT
5.1. The Project of the Firm shall be to design, develop and construct a residential housing colony on the Project Land consisting of several residential units so that the residential status of the Project is maintained and the Firm gets exemption under section 80IB of the Income Tax Act, 1961.
4.3.2. We find from the Partnership Deed dated 27.2.2007 entered into between Miras Properties Pvt Ltd, Narayan Ladha, Suresh Kewlani (collectively called Miras Partners) and Ashiana Housing and Finance India Limited , the following expressions assume greater significance :-
“the Firm” means the partnership firm hereby formed by the parties hereto and named as “Ashiana Amar Infrastructure”.
“the Project” means the commercial and residential colony to be developed and marketed on the Project Land and more fully described in Article 5.0 hereunder.
Article 5.0 – PROJECT
5.1. The Project of the Firm shall be to design, develop and construct a Commercial and residential colony on the Project Land consisting of several units.
We find from this partnership deed that the parties hereto have agreed to develop the project land measuring 11 Bighas in partnership on the terms and conditions stated thereunder. We also find from this partnership deed that Miras Partners have formulated a plan and project for development of the land in accordance with a lay out plan and such lay out plan has been approved by the Director of Town Planning, Jodhpur. The said lay out plan envisages construction of wholly commercial and residential colony on the Eastern portion of the Land measuring about 11 Bighas less 3000 Yards (the Project Land) and bordered in green colour in the said lay out plan and the land which shall remain with the Miras Properties Pvt Ltd is bordered in Red Colour. We also find from the revised sanctioned plan clearly demarcating the commercial area which is a shopping complex that were sold to other parties by the land owner. We find that the Ashina Amar Infrastructure had carried out the commercial project which is an independent legal entity for income tax purposes. We also find from the Learned CITA order that the assessee had duly made available the copies of the brochures issued by it in order to attract prospective buyers. As per the submission of the Learned AR, it is clearly discernible that both properties were independent units and belonging to two separate entities. These facts stated were not controverted by the revenue before us. We only find that the Learned CITA having brought the relevant facts on record and agreeing with the assessee had finally endorsed the views of the Learned AO without assigning any independent reasoning for his decision.
4.3.3. We place reliance on the co-ordinate bench decision of Bangalore Tribunal in the case of DCIT vs Brigade Enterprises (P) Ltd reported in 119 TTJ 269 (Bang) , wherein it was held that if the plan for residential units has been approved separately then the deduction should be allowed on each residential units separately.
4.3.4. We also find that the case law relied upon by the Learned DR on the decision of Hon’ble Karnataka High Court in the case of CIT vs Raghavendra Constructions reported in (2013) 354 ITR 194 (Karn) is actually in favour of the assessee wherein it was held that :
In calculating the built up area it is only the inner measurements of the residential unit on the floor level, which has to be taken into consideration. If there are any projections and balconies and if it exclusively belongs to the residential untis, then, that also has to be taken into consideration for deciding the built up area. However, if the residential unti is provided the facility of common area shared with other residential units such common area have to be excluded while computing the built up area. The language employed in defining built up area as the common area shared with other residential unit, 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 residential unit and if he has to share that common area with the owner of another residential unit, then that common area has to be excluded from the built up area. If this principle is kept in mind and applied to the facts of this case, in respect of 16 flats, the common area is shared by these 16 owners of residential units. In respect of A-1 and A-2 the common area is shared by the owners of flats A-1 and A-2. This common area is not the subject matter of sale as is clear from the recitals in the sale deed. In other words, the owners of the residential units do not have exclusive right to use these balconies as they have to share it with others. It is immaterial whether they have to share it with other 159 owners of the residential units or they have to share it with the adjoining owner of the residential unit, that area cannot be taken into consideration to decide the built up area. From the facts it is clear that if this balcony space is excluded all the 160 units are less than 1500 sq.ft and therefore the assessee was entitled to 100% tax exemption on this project.
We also find that the aforesaid decision of Karnataka High Court does not talk about terrace. From the above , it could be safely concluded that the commercial project was handled by an independent partnership firm styled as ‘Ashiana Amar Infrastructure’ for construction of commercial complex along with the approved plan, and both residential and commercial properties being independent untis and belong to two independent entities. We find that the assessee firm had considered 58 bighas of land for construction of residential units and adjacent land of 11 bighas belongs to another firm which constructed commercial project separately. Hence the deduction u/s 80IB(10) of the Act should be claimed unit wise and hence rejection of deduction u/s 80IB(10) of the Act on this ground by the Learned AO is not in order.
5. In view of the aforesaid findings and judicial precedents relied upon, we hold that the assessee is entitled for deduction u/s 80IB(10) of the Act and accordingly, the grounds raised by the assessee are allowed.
6. In the result, the appeal of the assessee is allowed.
The order pronounced in the open court on 22 -01-2016