Modi Builders & Realtors (P) Ltd. and Others. Vs ACIT (Telangana High Court)
Open Terrace/Portico should be excluded for computation of Built-Up Area to determine eligibility for Sec. 80-IB deduction
Conclusion: Since it was an open space which could not be brought within the purview of inner measurement of the residential unit, the said two areas i.e. the open terrace and the portico had to be excluded from computation of the built-up area entitling assessee the benefit that which was enshrined under Section 80-IB.
Held: Assessee – real estate developer was engaged in the business of construction of residential units / bungalows which were duplexes surrounded by a compound wall. Each residential unit consisted of a portico and an open terrace. Assessee filed its return of income for the Assessment Year 2009-10 admitting an income of Rs.3,16,46,847/- and claimed the entire amount as deduction under Section 80-IB (10) showing taxable income at Rs. NIL. The same was processed under Section 143(1). After scrutiny, the department had issued a notice under Section 143(2). After assessment, the department determined the total income of the assessee at Rs.3,41,41,862/- by making disallowances on two grounds, viz., disallowance of deduction under Section 80-IB (10) for a sum of Rs.3,16,46,847/- and disallowance under Section 14A for a sum of Rs.24,95,015/-. However, the Tribunal rejected the claim of the assessee pertaining to deduction under Section 80-IB amounting to Rs.3,16,46,847/- on the ground that the terrace which was open to sky and portico without walls could be included in computing the built-up area of each residential unit were exceeding 1,500 sq.ft. for the purposes of determining eligibility for deduction under Section 80-IB. It was held that from the Annexure-I attached to the assessment order, which was a drawing of the construction area and which was sought to be excluded was an open terrace and a portico, it was to be considered that an open terrace and a portico could not be brought within the ambit of the definition of an “built-up” area as was defined under Section 80-IB (14)(a), the definition that was inserted vide amendment that took place w.e.f. 01.04.2005. Moreover, from the drawing itself, it was evidently clear that the two spaces i.e. the open terrace and also the portico was an area which was otherwise totally open and exposed. It could not be under any stretch of imagination be brought or considered to be an area within the inner measurement of a residential unit. Since it was an open space which could not be brought within the purview of inner measurement of the residential unit, the said two areas i.e. the open terrace and the portico had to be excluded from computation of the built-up area entitling assessee the benefit that which was enshrined under Section 80-IB. The impugned order passed by the Tribunal as well as the impugned assessment order passed by the Appellate Authority deserve to be and were accordingly set aside.
