Section 80IB(10) — While computing the area of plot, the area of a plot acquired subsequently for providing approach road also needs to be included in the measurement of total plot area. Areas of open land/garden/store/gym room meant for common use are not to be included for calculating built-up area of the residential unit. Merger of flats, after purchase, by the owners thereof to make it into a larger flat for their own convenience cannot be a cause for denial of deduction u/s.80IB(10).
Facts:
The assessee-firm started construction of a residential project at Aundh, Pune. As per the original lay-out plan approved by Pune Municipal Corporation (PMC), the total area of the plot was shown to be 3995.34 sq.mts. i.e., marginally less than the prescribed area of 1 acre. The assessee submitted that in addition to the above-stated area of land, an additional land measuring 5 ‘Are’ was also acquired by the assessee for the approach road to the said project vide a separate agreement made with the same landlords from whom the above-stated area of 3995.34 sq.mts. of land was purchased. On including this area, the size of the plot exceeded 1 acre. The assessee submitted that if this area would not have been acquired, the PMC would not have sanctioned the plan and issued commencement certificate. The AO visited the site and being satisfied allowed the deduction.
The CIT found this order to be erroneous and prejudicial to the interest of the revenue on the ground that: (1) the area of the plot is less than 1 acre; (2) as per sale agreement of row house, the saleable area mentioned is more than 1500 sq. feet; (3) in A.Y. 2005-06 the AO has in order passed u/s.143(3) denied deduction u/s.80IB(10); and (4) flats have been merged together and the modification is not as per approved plans.
Aggrieved, the assessee filed an appeal questioning the validity of revisional order passed u/s.263 of the Act.
Held:
The Tribunal noted that in the case of Haware Engineers and Builders (P) Ltd. v. ACIT, (11 Taxmann.com 286) (Mum.) deduction claimed u/s.80IB(10) was denied by the A.O. on the ground that the additional plot acquired subsequently, by allotment, was a distinct plot which cannot be included in computation of the area of the plot. The Mumbai Bench of Tribunal held that in case an assessee finds that he is not eligible for deduction u/s.80IB(10), because size of the plot on which project is built is less than minimum necessary size, and he makes good that deficiency, and ensures that all the necessary pre-conditions are satisfied and approvals obtained, the assessee is eligible for deduction u/s.80IB(10). It was further held that the fact that he satisfied the conditions later, does not adversely affect its claim for deduction. What is material is that at the point of time when matter comes up for examination of the claim, the necessary pre-conditions for being eligible to claim are satisfied. The Tribunal held that the facts in the present case are similar as the assessee has acquired the additional land of 5 ‘Are’ subsequently after the acquisition of the main plot of land from the same seller. It held that it is a well-established proposition of law that for transfer of a plot within the meaning of the Act, the requirement is handing over of the possession and payment of consideration. Thus, registration of document of the transaction is not the foremost requirement to establish the transfer for the purpose of the Act. The Tribunal also noted that the Pune Bench of the Tribunal has in the case of Bunty Builders v. ITO held that housing project constitutes development plan, roads and grant of other facilities, therefore, those areas should exist within the prescribed limits and area to be considered as part and parcel of the project. In the present case, after addition of 5 Are of land purchased by the assessee vide agreement dated 20th March, 2004, for the purpose of approach road, to the area given in the lay-out plan, it fulfils the prescribed area for eligibility of claiming deduction u/s.80IB(10) of the Act.
As regards the second ground about row house having area exceeding 1500 sq.ft., the Tribunal noted that sale area included area of open land/garden and if that is excluded, then area of the row house is less than 1500 sq.ft.
As regards the merger of flats and thereby exceeding the prescribed limit of 1500 sq.ft. being taken as a basis for denial of deduction in A.Y. 2005- 06, the Tribunal held that there is no substance since it is undisputed fact that each flat was within the prescribed limit of 1500 sq.ft. area and if after purchasing of 2 flats the owner(s) of flats merges it into a larger flat, the claimed deduction cannot be denied to the assessee.
The Tribunal held that the grounds on which the assessment order has been treated as erroneous and prejudicial to the interest of the Revenue are debatable and hence revisional powers cannot be invoked.
The Tribunal allowed the appeal filed by the assessee.
