Housing project- Special deduction u/s. 80- IB(10)- A. Y. 2004-05: Not necessary that assesee has to develop flats: Residential area- Built-up area- Definition- Car park area not includible

The assessee is a promoter, claimed deduction u/s. 80- IB(10) of the Income-tax Act, 1961 on the housing project for the A. Y. 2004-05. The Assessing Officer denied the claim on two counts, viz., (i) that the assessee had not developed the flats, and (ii) that out of 66 flats constructed, the built up area of 25 flats exceeded the prescribed maximum limit of 1,500 sq. ft. if the car park area of 220 sq. ft. was included. The Commissioner (Appeals) allowed the deduction u/s. 80-IB(10) holding that the provisions of section 80-IB(10) did not warrant ownership of land. As regards car park area, he held that there was no definition for the term ‘common area” in the Act. He held that the car park area has to be treated as common area. Accordingly, he held that the assessee had not come under any of the disqualifications prescribed u/s. 80-IB(10). The Tribunal confirmed the order of the Commissioner (Appeals).

On appeal by the Revenue, the Madras High Court upheld the decision of the Tribunal and held as under:

“i) The assessee was entitled to the benefit of the claim u/s. 80-IB(10) even though the assessee was not a developer but only a builder.

ii) In the absence of any specific definition of the term “built-up area” during the relevant period, the reasoning of the Commissioner (Appeals), which was confirmed by the Tribunal was justified. Nevertheless, section 80-IB(10) speaks about the residential unit having a maximum built up area of 1,500 sq. ft. to claim deduction. Even u/s. 80-IB(14)(a), which comes into effect from April 1, 2005, “built-up area is defined as inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls, meaning thereby, the actual residential portion of the property. It clearly states that it will not include common areas shared with other residential units. Thus, there was no justification in including the car park in the definition of the built-up area of the residential unit for the purpose of determining the maximum built-up area.”