Section 80-IB(10) of the Income-tax Act, 1961 — Once flats were sold separately and two flat owners themselves combined separate flats whereby the total area exceeded 1,500 sq.ft., deduction u/s.80-IB(10) cannot be denied to the assessee-developer on this ground.

Section 80-IB(10) of the Income-tax Act, 1961 — Once flats were sold separately and two flat owners themselves combined separate flats whereby the total area exceeded 1,500 sq.ft., deduction u/s.80-IB(10) cannot be denied to the assessee-developer on this ground.

For the relevant assessment years, the Assessing Officer noticed that in the project developed by the assessee-developer the deduction u/s.80-IB(10) could not be allowed because, in some cases, two flats were combined to make a single dwelling unit with a single entrance and, hence, the built-up area of the combined flats worked out to be more than 1,500 sq.ft. The CIT(A) confirmed the disallowance.

Since there was a difference of opinion between the Members, the matter was referred to the Third Member u/s.255(4). The Third Member allowed the deduction u/s.80-IB(10). The Third Member noted as under:

(1)    The assessee has placed on record the confirmation given by the purchasers of the flats stating that they had combined the two flats after taking possession for their own convenience.

(2)    Once the flats are sold separately under two separate agreements, the builder has no control unless the joining of the flats entails structural changes. Nothing is brought on record to evidence such structural changes.

(3)    Therefore, it is quite clear that the two flat owners have themselves combined the flats whereby the area has exceeded 1,500 sq.ft. The project as a whole and the assessee cannot be faulted for the same.

(4)    Moreover, clauses (e) and (f) of section 80-IB (10) are effective from 1st April, 2010 and they are not retrospective in operation. Therefore, they do not apply to the present case which pertains to the years prior to 1st April, 2010.