Naresh T. Wadhwani vs. Dy. Commissioner of Income Tax In the Income Tax Appellate Tribunal Pune Bench “A”, Pune Before G. S. Pannu (A. M.) and R. S. Padvekar (J. M.) ITA Nos.18, 19, 20, 60 & 61/PN/2013 Assessment Years : 2007-08, 2008-09 & 2009-10. Decided on 28.10.2014 Counsel for Assessee/Revenue: V. L. Jain/M. S. Verma

Facts:
The assessee’s claim for deduction u/s. 80IB(10) was rejected by the lower authorities on the ground that the condition prescribed in clause (c) of section 80IB(10) was not complied with. As per sub-Clause (c) of section 80IB(10) the residential units in the housing project cannot have built-up area of more than 1,500 sq.ft. The housing project of the assessee in Pune city was approved by the local authority on 29.07.2005. The AO applied the definition of ‘built-up area’ contained in section 80IB(14) (a). According to him, as per the said definition, the area comprising of the projected terrace was also to be considered as part of the ‘built-up area’. Based thereon the AO computed the area and found that six of the residential units of the housing project were having built-up area in excess of 1500 sq.ft. Therefore, he denied the claim of the assessee for deduction u/s. 80IB(10) of Rs.1.4 crore. On appeal the CIT(A) upheld the stand of the AO that the built-up area of the aforesaid six units was violative of the condition prescribed in Clause (c) of section 80IB(10). He, however, allowed pro-rata deduction in respect of profits from the residential units of the project which complied with the requirements of section 80IB(10)(c) of the Act. Not being satisfied with the order of the CIT(A), assessee as well as the Revenue are in appeal before the tribunal.

Before the Tribunal, the revenue submitted that open terrace was a private terrace which was available for use of the owner of the unit to the exclusion of others. It also relied on the decisions of the Hyderabad Tribunal in the case of Modi Builders & Realtors (P.) Ltd., (2011) 12 taxmann. com 129 and of the Mumbai Tribunal in the case of Siddhivinayak Homes, Mumbai vs. Department of Income Tax, vide ITA No. 8726 / Mum / 2010 order dated 26.09.2012, for the proposition that all projections and elevations at the floor level are liable to be included in the definition of ‘built-up area’ for the purposes of examining the condition prescribed in Clause (c) of section 80IB(10) of the Act. According to it, the built-up area for the purpose has to be understood in the light of what has been sold by the assessee builder to the respective customers.

Held:
Relying on the decision of the Madras High Court in the case of M/s. Ceebros Hotels Private Limited vs. DCIT (Tax Case (Appeal) No. 581 of 2008 order dated 19.10.2012) the Tribunal held that the area of open terrace cannot be a part of the ‘built-up area’ in a case where such terrace is a projection attached to the residential unit and there being no room under such terrace, even if the same is available exclusively for use of the respective unit holders. The Tribunal also observed that as per the said decision, terrace area would not form part of the built-up area even if the assessee sold it to the purchaser as a private terrace.