Naresh T. Wadhwani vs. DCIT (ITAT Pune)

The issue to be decided is as to whether the area of projected terrace (open to sky) is liable to be included within the meaning of expression “built-up area” contained in clause (c) of section 80IB(10) of the Act.

(i) The controversy revolves around the condition prescribed in clause (c) of section 80IB(10) of the Act. As per clause (c) of section 80IB(10) of the Act, the maximum built-up area of the residential units comprised in the eligible housing project shall not exceed 1000 sq.ft. where such units are situated within city of Delhi and Mumbai or within 25 km. from the Municipal limit of such cities and in other places the prescribed limit is 1500 sq.ft.. The housing project of the assessee before us is located within the Municipal limits of PCMC and therefore in terms of clause (c) of section 80IB(10) of the Act, the maximum built-up area of the residential unit is capped at 1500 sq.ft.. The dispute before us8 is with regard to six residential units, which have been detailed by us earlier, wherein as per the Assessing Officer, the individual built-up area exceed 1500 sq.ft.. The working of built-up area done by the Assessing Officer is sought to be resisted by the assessee and the bone of contention is whether or not to include the area of projected terrace (open to sky) for computing the built-up area of the respective units.

(ii) The Finance (No.2) Act, 2004 inserted the definition of built-up area w.e.f. 01.04.2005 in terms of section 80IB(14)(a) of the Act. In terms of the said definition, built-up area means the inner measurement of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units. On the strength of the aforesaid definition, the claim of the Revenue is that the terraces in question are projections attached to the respective residential units and also that there is no room under the area of the terrace and such terraces are exclusively used by the respective unit owners. In other words, as per the Revenue the projected terrace falls within the meaning of words ‘projections’ and ‘balconies’ contained in section 80IB(14)(a) of the Act and the same is not a common area shared with other residential units and in this manner, in terms of section 80IB(14)(a) of the Act, such an area is liable to be included in the expression ‘built-up area’.

(iii) In so far as the applicability of the definition of built-up area inserted by Finance (No.2) Act, 2004 w.e.f. 01.04.2005 is concerned, it is quite clear that the same is applicable for ascertaining the fulfillment of condition prescribed in clause (c) of the Act in relation to the present project, since the project of the assessee has been approved by the local authority on 29.07.2005 i.e. after the definition of built-up area contained in section 80IB(14)(a) of the Act came into force w.e.f. 01.04.2005. Therefore, in the present case, it is imperative that the meaning of expression ‘built-up are9a ’ is to be understood having regard to its definition contained in clause (a) of section 80IB(14) of the Act.

(iv) Consequently, the AO is wrong in including the area of terrace as 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. (Ceebros Hotels Private Limited vs. DCIT, vide Tax Case (Appeal) No. 581 of 2008 order dated 19.10.2012, CIT vs. Sanghvi and Doshi Enterprise, (2013) 255 CTR 156 (Mad.), Amaltas Associates vs. ITO, (2011) 131 ITD 142, Modi Builders & Realtors (P.) Ltd., (2011) 12 taxmann.com 129 (Hyd.), Siddhivinayak Homes 28 September, 2012, ITA No.8726/Mum/2010 & order dated 26.09.2012 referred)