Case Law Details
The first and foremost issue to be decided is as to whether the area of projected terrace (open to sky) is liable to be included within the meaning of expression “built-up area” contained in clause (c) of section 80IB(10) of the Act.
On this aspect, the stand of the assessee is that the word “terrace” is not includible in the meaning of expression “built-up area” even if one has to go by the definition of the built-up area prescribed in section 80IB(14)(a) of the Act. The learned counsel referred to the decision of the Ahmedabad Bench of the Tribunal in the case of Amaltas Associates vs. ITO, (2011) 131 ITD 142 for the proposition that open terrace, not being a balcony or verandah cannot be considered as a part of the ‘built-up area’ as defined in section 80IB(14)(a) of the Act. According to the learned counsel, the Ahmedabad Bench of the Tribunal was considering the stand of the Revenue that open terrace was to be considered a part of the ‘built-up area’. According to him, the Ahmedabad Bench of the Tribunal considered the definition contained in section 80IB(14)(a) of the Act and opined that the definition of expression ‘built-up area’ includes a balcony which is not an open terrace. Further, it has also been submitted that a ‘terrace’ is not to be equated to a ‘projection’, which is one of the components finding place in the definition of the expression ‘built-up area’ as per section 80IB(14)(a) of the Act. The learned counsel further clarified that in so far as the present case is concerned, it is a case of terrace (open to sky) which is quite distinct from a balcony. It is asserted that the two terms are independent and for that matter a reference was also made to the Development Control Rules of the local authority in question i.e. Pimpri Chinchwad Municipal Corporation (PCMC). Further, heavy reliance has also placed on an unreported judgement of the Hon’ble Madras High Court in the case of M/s Ceebros Hotels Private Limited vs. DCIT, vide Tax Case (Appeal) No. 581 of 2008 order dated 19.10.2012, a copy of which was placed on record. The judgement of the Hon’ble Madras High Court has been relied upon to support the proposition that the area of an open terrace is liable to be excluded from the working of the built-up area of the unit. It is also contended that the Hon’ble Madras High Court has further followed the aforesaid judgement in its latter judgement in the case of CIT vs. Sanghvi and Doshi Enterprise, (2013) 255 CTR 156 (Mad.).
On the other hand, the learned CIT-DR has vehemently submitted that open terrace which is a subject-matter of controversy was a private terrace which was available for use of the owner of the unit to the exclusion of others. The learned CIT-DR has emphasized that in the present case the housing project of the assessee is comprising of independent row houses built on a Duplex model and it is not a case of multi-storey building having independent flats. It was, therefore, contended that the aforesaid distinction has to be borne in mind while appreciating the meaning of expression ‘built-up area’ contained in section 80IB(14)(a) of the Act. Nevertheless, the learned CIT-DR has relied upon the following decisions : (i) Hyderabad Bench of the Tribunal in the case of Modi Builders & Realtors (P.) Ltd., (2011) 12 taxmann.com 129 (Hyd.); and, (ii) Mumbai Bench of the Tribunal in the case of Siddhivinayak Homes, Mumbai vs. Department of Income Tax on 28 September, 2012, vide ITA No.8726/Mum/2010 order dated 26.09.2012, for the proposition that all projections and elevations at the floor level are liable to be included in the definition of ‘built-up area’ for the purposes of examining the condition prescribed in clause (c) of section 80IB(10) of the Act. The learned CIT-DR also raised an issue that the built-up area for the purposes of clause (c) of section 80IB(10) of the Act has to be understood in the light of what has been sold by the assessee builder to the respective customers. According to the learned CIT-DR, though the said aspect is not emerging from the orders of the authorities below, so however, the built-up area as understood for the purposes of sale-purchase between builder and the ultimate buyer can also be relevant factor to consider as to what all areas are to be considered as a part of the expression ‘built-up area’ contained in clause (c) of section 80IB(10) of the Act.
14. We have carefully considered the rival submissions. Section 80IB(10) provides for deduction in relation to profits derived from undertaking development and building of a housing project subject to certain conditions prescribed therein. One of the foremost condition is contained in clause (a) of section 80IB(10) of the Act which is to the effect that the housing project eligible for the claim of deduction shall be approved by the local authority. The assessee before us is a builder who has undertaken development and construction of a housing project, named, ‘Sai Nisarg Park – Mayureshwar’ and the said project has been approved by the concerned local authority i.e. PCMC on 29.07.2005 and undisputedly it complies with the requirement of clause (a) to section 80IB(10) of the Act. There are other conditions prescribed in section 80IB(1 0) by way of clauses (b) to (f) of the Act, so however, the only controversy before us revolves around the condition prescribed in clause (c) of section 80IB(1 0) of the Act. As per clause (c) of section 80IB(10) of the Act, the maximum built-up area of the residential units comprised in the eligible housing project shall not exceed 1000 sq.ft. where such units are situated within city of Delhi and Mumbai or within 25 km. from the Municipal limit of such cities and in other places the prescribed limit is 1500 sq.ft.. The housing project of the assessee before us is located within the Municipal limits of PCMC and therefore in terms of clause (c) of section 80IB(10) of the Act, the maximum built-up area of the residential unit is capped at 1500 sq.ft.. The dispute before us is with regard to six residential units, which have been detailed by us earlier, wherein as per the Assessing Officer, the individual built-up area exceed 1500 sq.ft.. The working of built-up area done by the Assessing Officer is sought to be resisted by the assessee and the bone of contention is whether or not to include the area of projected terrace (open to sky) for computing the built-up area of the respective units.
The Finance (No.2) Act, 2004 inserted the definition of built-up area w.e.f. 01.04.2005 in terms of section 80IB(14)(a) of the Act. In terms of the said definition, built-up area means the 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. On the strength of the aforesaid definition, the claim of the Revenue is that the terraces in question are projections attached to the respective residential units and also that there is no room under the area of the terrace and such terraces are exclusively used by the respective unit owners. In other words, as per the Revenue the projected terrace falls within the meaning of words ‘projections’ and ‘balconies’ contained in section 80IB(14)(a) of the Act and the same is not a common area shared with other residential units and in this manner, in terms of section 80IB(14)(a) of the Act, such an area is liable to be included in the expression ‘built-up area’.
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