Indian Kanoon - Search engine for Indian Law

area. However, the Assessing Officer and CIT(A) had referred to super built up area which is also called the saleable area, which is not to be adopted for allowing deduction under section 80IB(10) of the Act. The learned Authorized Representative for the assessee in this regard stressed that the area within four walls of flat is to be taken into account for determining whether the assessee fulfils the conditions of area being less than 1500 sq.ft. With regard to statements recorded of officials of assessee company and various customers, the Assessing Officer pointed out that though before the Assessing Officer and CIT(A) various contentions were raised in this regard but the assessee admits that it has amalgamated the flats but even after amalgamation, the area of flats in dispute is less than 1500 sq.ft. He further pointed out that the Assessing Officer during the course of assessment proceedings for assessment year 2003- 04 had asked the DVO to find out the area of flats and he on the basis of plans and on his own working has given a finding that the combined area of flats was more than 1500 sq.ft. However, during the course of assessment proceedings relating to assessment year 2004-05, the Assessing Officer again deputed the same DVO to verify the claim of assessee, who went to site and providing working sheet as part of valuation report, wherein the combined area of flats is less than 1500 sq.ft. The learned Authorized Representative for the assessee points out that the CIT(A) while deciding the appeal for assessment year 2003- 04 takes note of the first report of DVO and confirmed the addition. While deciding the appeal relating to assessment year 2004-05, he confirmed the addition since his predecessor had already taken a view. The learned Authorized Representative for the assessee pointed out that in such scenario, verification exercise can be carried out in order to determine the physical area of flats and if the claim of the assessee is found to be correct, then the assessee is entitled to proportionate deduction of 80IB(10) of the Act.

assessee to file record plans for regularization. He stressed that as far as PMC is concerned, the assessee was not in default vis-à-vis the amalgamation of flats.

17. The next argument of learned Authorized Representative for the assessee was the dimension of violation by the assessee i.e. combination of two flats. He pointed out that even in case of violation, if any, where the area of combined flats was less than 1500 sq.ft., then the deduction under section 80IB(10) of the Act was to be allowed. In any case, prorata deduction is to be allowed to the assessee. He fairly admitted that the Assessing Officer may carry out the necessary verification exercise by deputing the DVO to verify the area of flats within boundaries and in case the same is found even after amalgamation, at less than 1500 sq.ft., then the assessee is entitled to claim the said deduction.

M/s. Parmar Properties Pvt. Ltd.

40. In the totality of the above said facts and circumstances, the question which arises is whether the assessee has deviated from the sanctioned building plans and had constructed the flats having area more than 1500 sq.ft. or change the usage of sanctioned flats from the residential to commercial, we hold that the assessee is entitled to claim the deduction in respect of such flats which fulfill the conditions laid down in section 80IB(10) of the Act i.e. having residential use and having total area of 1500 sq.ft. within boundaries of the flats. Merely because the assessee has merged flats but in case the area of merged flats is within prescribed limit of 1500 sq.ft., then such flats are eligible for deduction under section 80IB(10) of the Act and in this regard of merger of flats, there is mechanism provided by the municipal authorities, wherein suitable fines and fees are levied after the assessee submits the record plans. Similar issue of combination of flats and entitlement to deduction to flats if the area of combined flats was within the prescribed limit of 1500 sq.ft. has been decided in following cases of various Benches of Tribunal and we place reliance on the same:-

M/s. Parmar Properties Pvt. Ltd.

42. Another aspect of the issue is the usage i.e. extra commercial usage as against sanctioned commercial usage. Again this facet is to be looked into by State Authorities. The assessee before us has not claimed deduction on account of units of commercial usage.

43. The last aspect of the issue raised in the present appeal is the area of flat. The deduction claimed under section 80IB(10) of the Act has been denied to the assessee for violation of conditions of clause (c) of section 80IB(10) of the Act i.e. built up area. Various facets have been looked into by the authorities below i.e. joining of flats, row-houses, statement recorded of the purchasers, etc. The Assessing Officer also directed the DVO to inspect and submit a report of the built up area. The DVO on the basis of building plans and without physical verification in assessment year 2003-04 gave a report that the built up area of the flats was more than 1500 sq.ft. The DVO also considered the sale agreements executed by the assessee with the intended purchasers. The explanation of the assessee in this regard was that the sale agreement talk about the super built up area i.e. the saleable area which is different from the covered area. It was also stressed by the assessee before the Assessing Officer that the DVO had not carried out any physical verification exercise by way of physically verifying the area within boundaries of individual residential flats whether merged or not. The claim of assessee was that except for B1 and C3, all the other units were fulfilling the conditions of being less than 1500 sq.ft. The Assessing Officer did not accept the plea of assessee in the instant assessment year and held the assessee to have violated the conditions of clause (c) of section 80IB(10) of the Act and denied the deduction to the assessee. Similar plea was made by the assessee in the succeeding year i.e. assessment year 2004-05 and the Assessing Officer directed the same DVO to file physical verification report of the constructed residential flats. The DVO has submitted M/s. Parmar Properties Pvt. Ltd.