Commissioner of Income Tax vs Manju R. Gupta

The only question and which is stated to be substantial question of law reads as under:

"Whether, on the facts and circumstances of the case and in law, was right in holding, that the housing project which also had certain units exceeding the prescribed ceiling on the built up area, the profits from the other units can be worked out separately and allowed deduction u/s 80IB(10), subject to fulfilling other conditions prescribed under the said section?"

In relation to this question, Mr. Malhotra submits that it is not covered by any of the orders passed by this Court earlier and against the Revenue. Rather, this question is a substantial question of law because the benefit of section 80IB(10) cannot be derived and the deduction was impressible as developer-assessee in this case had violated section 80IB(10)(c). The residential unit must have the maximum built up area of one thousand sq. ft. if the same is situated within the city of Delhi or Mumbai. Admittedly, this construction and in relation to the NG Complex came within the city of Mumbai limits. The residential unit should have an area less than one thousand sq. ft. However, admittedly, two flats in the project, namely, flat B103, B903 exceeded one thousand sq. ft. This was the detail which was available with the Assessing Officer. The Assessing Officer and the Commissioner both held that the Assessee had constructed these two flats with more than thousand sq. ft. area. Hence the requirement under section 80IB(10) is not fulfilled.

Mr. Mistry, learned Senior Counsel, has relied upon the finding of the Commissioner and the Tribunal on this point. Both referred to the location and number of the flats and go ahead to term the construction of these flats as beyond the permissible limit of thousand sq.ft. However, the Tribunal concluded that the area of the flats is less than one thousand sq. ft. and within the meaning of section 80IB(10)(a). The constructed area is less than one thousand sq. ft. However, as per the demand and requirement of the buyer one room from each flat was either added or taken away thereby the area of the flat exceeded one thousand sq. ft. but that is at the time of sale. In such circumstances, the benefit could not be denied.

We have heard both sides on this point and we find that the Tribunal has taken a consistent view that if some of the flats are constructed in violation of the conditions of built up area, then, the proportionate deduction will have to be reduced. Now, the proportionate deduction is available only when other conditions as regards the area of the plot is satisfied. The Tribunal applied the other condition, namely, project is on the size of the plot of a land which has a minimum area of one acre. Therefore, it does not affect the condition and section 80IB(10) benefit or deduction cannot be denied on that score. The Tribunal approved the finding of Commissioner of Income Tax.

The Tribunal itself notes as to how the area crossed the limits only at the time of sale, that is, when the buyer requested the developer to alter the area and by either withdrawing or adding a portion from adjacent flats. The Developer adhered to the mandatory condition of the Construction not exceeding one thousand square feet whole completing the developmental work. In such circumstances, and when a finding rendered against the Assessee has been upheld by the Tribunal, then, all the more we do not see any substantial question of law. The matter has already been looked at by us in the context of a similar controversy and arising from determination and consideration in the case of Commissioner of Income Tax V/s. Happy Home Enterprises and Commissioner of Income Tax V/s. Kanakia Spaces (P) Ltd. in Income Tax Appeal No. 308 of 2012 decided on 19th September, 2014. The Division Bench to which one of us (Shri S.C. Dharmadhikari, J.) was a party held in similar circumstances that the crucial or relevant date is the date on which the construction has been carried out and completed. If the construction is comprising of flats having more than the stipulated area, then, the question of denying the deduction would arise. However, we do not think that in absence of an Appeal by the Assessee any wider controversy should be decided. Suffice it to hold that the factual conclusion in para 10 of the impugned order does not raise any substantial question of law.

In relation to other two questions, we are of the view that they are covered by our order passed today in Income Tax Appeal No. 172 of 2013. Insofar as question No. 6.1 is concerned, the Tribunal concluded that it is not the developer or the Assessee who constructed the commercial units and in excess of the prescribed limit. It is the persons, namely, the buyers and purchasers or their nominees or persons claiming through them occupying the same converted the user from residential to nonresidential. That also would not disentitle the Assessee from claiming the deduction. Consequently, none of the questions can be termed as substantial question of law. The Appeal is, therefore, dismissed. No order as to costs.