By TIOL News Service

AHMEDABAD, OCT 18, 2016: THE issue is - Whether if certain area is not shared but is exclusively assigned for the use of a particular residential unit holder, that would mean that such area would automatically be included in the built up area, for the purpose of computing deduction u/s 80IB(10). NO is the verdict.

Facts of the case

The assessee is a business concern. For the AY 2006-07, it had filed the return of income of declaring income of Rs.5,15,340/after claiming deduction under section 80IB on a sum of Rs.4.33 crores (rounded off). Case of the assessee was that the assessee had developed a housing project, income from which would be exempt in terms of section 80IB(10). AO as well as the Commissioner rejected such a claim primarily on two grounds; one that the assessee was not a developer of a housing project, but had acted as a contractor. Secondly, that in some of the units, the builtup area was in excess of the maximum permissible limit, for the purpose of section 80IB(10). On appeal, Tribunal, allowed the assessee's appeal by the impugned judgment and held that the assessee was a developer. The assessee had undertaken full responsibility of constructing the residential units and had also been responsible for the resultant profit or loss arising out of such venture. The assessee thus, had undertaken full risk. Regarding the Revenue's contention regarding excess builtup area, the Tribunal held that the open space attached to a penthouse, cannot be included in the term 'balcony'. The Tribunal was of the view that the case of the present assessee was same as the cases of Radhe Developers and Shakti Corporation, two sets of appeals, where the Tribunal had allowed the deduction u/s 80IB(10). The decision of the Tribunal in case of Radhe Developers and Shakti Corporation, came up for consideration before this Court in case of CIT v. Radhe Developers, 2012-TIOL-71-HC-AHM-IT. The judgment of HC in case of Radhe Developers was carried in appeal before SC, which was dismissed.

Held that,

++ the Tribunal in the impugned judgment has referred to the terms and conditions between the assessee and the society, from which, the Tribunal culled out that entire planning, sanctioning of plan, work of construction, development of the property was done by the assessee. The assessee would enroll the members and accept payments from such members. Entire sale consideration was received by the assessee from such members. As per the agreement, the assessee had to provide the payment from construction, engage architect, engineer and site supervisor and also obtain necessary permission from AUDA. The Tribunal concluded that these conditions would show that the assessee was a developer and not a contractor. The case of the assessee would in background of such findings of the Tribunal be covered by the judgment of this Court in case of Radhe Developers. The moment a certain area is not shared but is exclusively assigned for the use of a particular residential unit holder, would not mean that such area would automatically be included in the builtup area. In order to be part of the builtup area, the same must be part of the inner measurements of a residential unit or projection or balcony. The open terrace space on the top floor of a building would not satisfy this description. It will also not be covered in the expression balcony. Term 'balcony' has been explained in Webster's Third International Dictionary (Unabridged) as unroofed platform projecting from the wall of a building, enclosed by a parapet or railing, and usually resting on brackets or consoles. It is often used as synonyms to gallery, loggia, veranda, piazza, porch, portico, stoop etc. In the context of residential or even commercial complexes, term 'balcony' has gained a definite common parlance meaning. It usually consists of a projection from a building covered by a parapet or railing and may or may not but usually is covered from the top. This term 'balcony' certainly would not include an open terrace adjoining a bedroom or any other constructed area of a penthouse. The terrace is not a projection. In the result, question is answered against the Revenue and tax appeal is dismissed.

(See 2016-TIOL-2488-HC-AHM-IT)