Sec. 80IB of Income Tax Act, 1961—Deduction —Matter restored to the file of the A.O for fresh adjudication on the issue whether “dry balcony” was to be included or not while calculating the “built-up area” of the flats in the assessee’s project.

Facts: Whether CIT(A) erred in allowing deduction u/s 80IB(10) to the assessee when the assessee failed to produce the Building Completing Certificate and the Occupation Certificate as required u/ 80IB(10)(a)(iii) r.w explanation (ii) and Whether CIT(A) erred in allowing deduction u/s 80IB(10) to the assessee in spite of fact that the assessee did not fulfil the conditions laid down under the section 80IB(10)(c) as some of the flats were more than the prescribed area and Whether CIT(A) erred in allowing deduction u/s 80IB(1) to the assessee in spite of the fact that the assessee has claimed high gross profit of 63.08% when the assessee had not fulfilled all the conditions laid down in the provisions of the Act.

Held, that assessee has assailed the order of CIT(A), for the reason, that he had erred in disallowing the assesses claim for deduction of Rs. 4,52,95,102/- u/s 80IB(10) in respect of flat nos. 1,2 and 7 on each floor of the building. The genesis of the controversy involved pertains to the construing of the term “built-up area” by the CIT(A), who as per the assessee had erred in concurring with the A.O that the area of the “dry balcony” is to be included for the purpose of calculating the “built-up area” of the flats within the meaning of Sec. 80IB(14)(a). As observed, it is only pursuant to inclusion of the area of “dry balcony” (30 sq. ft), that the “built-up area” of the flat nos. 1, 2 and 7 on each floor of the building is found to have exceeded the prescribed limit of 1000 sq.ft. As such, the disallowance of the assessee’s claim for deduction of Rs. 4,52,95,102/- pertains to the flat nos. 1,2 and 7 on each floor of the building in the assessee’s project. We find that the construing of the term “built-up area” as envisaged in Sec. 80IB(14)(a) by the A.O had been assailed by the revenue in its appeal in the assessee’s own case for the immediately preceding year i.e A.Y 2011-12. In the preceding year, the CIT(A) finding favour with the claim of the assessee that the “dry balcony” was not to be included while calculating the “built-up area” of the flats in the assessee’s project, had concluded, that area of all the flats was well within the prescribed limit of 1000 sq.ft. As we have after exhaustive deliberations not found favour with the manner as per which the CIT(A) had construed the term “built-up area” which stands defined in Sec. 80IB(14)(a), therefore, with specific directions we have restored the matter to the file of the A.O for fresh adjudication. Accordingly, we are of the considered view that on the same terms the matter in the present appeal also requires to be restored to the file of the A.O, who is directed to adjudicate the issue afresh considering our observations/directions recorded while disposing off the Grounds of appeal Nos. 2 & 5 in ITA No. 5912/Mum/2017 raised in the revenue’s appeal in the assessee’s own case for the immediately preceding year i.e A.Y 2011-12. On the same terms, we may herein observe that in case the flat purchasers are de facto in exclusive possession/enjoyment of the “dry balcony” attached with the flat, then the area of the same shall be included while computing the “built-up area” of such flat. However, if such projection is either in the nature of a service projection to be used for servicing the building or carrying out repairs of the building, or a common area shared with the other residential units, then the same would not be included in the “built-up area” of the flat. Resultantly, appeal of assessee is allowed for statistical purposes. - HARSHVARDHAN CONSTRUCTIONS V/s ITO - [2020] 81 ITR (TRIB) 299 (ITAT-MUMBAI)