HIGH COURT OF KARNATAKA
CIT V/s. Mystic Investments
IT APPEAL NO. 854 OF 2008
FEBRUARY 29, 2012
1. This appeal is preferred by the revenue challenging the order passed by the Tribunal which has granted benefit to the assessee under section 80-IB (10) of the Income-tax Act, 1961.
2. The assessee is a firm dealing in property development. The assessee obtained a sanctioned plan in the year 1966 for construction of a multi-storied residential flats on a land measuring about 38 guntas, i.e., 44,030 sq. ft. Before the completion of the project, section 80-IB (10) came to be introduced. In order to have the benefit of the said property, the assessee purchased an adjoining piece of land measuring about 1,440 sq. ft. and clubbed the same with his land where he was putting up the housing project. The total area of the land became 44,740 sq. ft. The land which is minimum required for being eligible for the benefit. under section 80-IB (10) is 1 acre of land, namely 43,480 sq. ft. Thereafter, he applied for a modified plan to meet the requirement of section 80-IB (10). It was granted in the year 2001. On 20.5.2003 occupancy certificate has been issued. He has built 63 units. Each of the units is less than 1,500 sq. ft. Thereafter, he sold these residential units to various purchasers. In the sale deed executed, description of the land held by the assessee is clearly set out and thereafter a fraction of the share in the said land proportionate is transferred to the purchasers. Therefore, the assessee claimed the benefit of the aforesaid provision. The Assessing Officer denied the said benefit on the ground that the said project was not completed within four years, the construction is put in violation of the sanctioned plan, flats are used as service apartments, the housing project is only in an area of 38 guntas and some of the flats exceed 1,500 sq. ft. On that ground, the Assessing Officer denied the relief to the assessee.
3. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner of Income Tax (Appeals). He confirmed the order of the assessing authority. It is against the said order, the assessee preferred an appeal to the Tribunal.
4. The Tribunal held that, when the assessee has completed the project within 4 years from the date of modified plan, it cannot be said that the project is not completed within the stipulated period. Though there are some minor deviations in the sanctioned plan, that would not come in the way of the assessee claiming the benefit. Though the flats which are sold, are used as service apartments, the assessee has no role to play and therefore on that ground the benefit cannot be denied. Factually they held the project is in an area which is more than 1 acre and not in an area of 38 guntas as held by the authorities. If common areas and balcony is excluded, all the flats are within 1,500 sq. ft. Therefore, they found no justification to deny the benefit of Section 80-IB (10) to the assessee. Accordingly, they set aside the order passed by the assessing authority as well as the Appellate Commissioner and granted the benefit to the assessee. Aggrieved by the said order, the revenue is before this Court.
5. We have heard the learned counsel appearing for the parties.
6. The appeal was admitted to consider the following substantial question of law: –
Whether the Tribunal was correct in holding that the assessee had complied with the conditions provided in section 80-IB (10) of the Act subsequently and therefore the allowance had to be granted without taking into consideration that the assessee on facts had not complied with the conditions and consequently recorded a perverse finding?
7. From the aforesaid material, it is clear though the assessee owned only 38 guntas of land when he started the construction, he acquired an extent of 1,440 sq. ft. of land adjoining the said land, thus making the total land in which the project was put up, to 44,470 sq.ft. more than 43,480 sq.ft. which is prescribed under the law. The modified housing project was approved in the year 2001 after the aforesaid provision was inserted. On 20.5.2003 occupancy certificate is issued. Therefore, the construction is within the 4 years period stipulated. The assessee has sold these apartments to various purchasers. The various purchasers in turn are using it as service apartments for which the assessee cannot be held liable in any way and on that ground he cannot be denied the benefit. Learned counsel relies on the observations in the assessment order that the plan itself is sanctioned for service apartments. The said submission has no substance. There is nothing like a sanction of plan for service apartments. The plan is sanctioned for putting up residential units. After the construction depending upon the usage to which those apartments are, put to, they are characterized as service apartments. That is where the Assessing Officer as well as the Appellate Authority misconstrued the entire housing project developed by the assessee and committed the error.’
8. Out of 63 flats it is stated 8 flats exceed the built-up area in excess of 1,500 sq. ft. In coming to the conclusion the authorities have taken into consideration the balcony area and the common area. Prior to 1.4.2005 as law stood then balconies and common areas have to be excluded for the purpose of calculating the built-up area. If those two areas are excluded, admittedly the apartments measure less than 1,500 sq. ft. In that view of the matter, the Tribunal was justified in setting aside the order passed by the lower authorities and granting exemption to the assessee to which he is legitimately entitled to. In that view of the matter, we do not find any merit in this appeal. Accordingly, the appeal is dismissed and the substantial question of law is answered in favour of the. assessee and against the revenue.