M/S. COMMONWEALTH DEVELOPERS REP. BY ITS PARTNER DATTA DAMODAR NAIK vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1

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TXA/4/2014HC BombayHCBM05003377201311 March 2014Author: R. S. DALVI,F. M. REIS21 pages
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What did the High Court hold?

The High Court held that the area of a courtyard cannot be included in the built-up area for the purpose of computing deduction under Section 80-IB(10) of the Income Tax Act. The Tribunal was not justified in including the courtyard area, which led to the conclusion that the residential unit exceeded 1500 sq ft, thereby disentitling the appellant from the deduction. The court found that the Tribunal had misconstrued the provisions of the Income Tax Act and the material on record. The contention that the Tribunal's findings of fact cannot be interfered with was rejected in this case due to the misconstruction of law. Consequently, the first substantial question of law was answered in favour of the assessee. In view of this finding, the second substantial question of law did not require examination. The appeal was allowed, and the ITAT's judgment was quashed and set aside.

What were the facts?

The assessee, M/s. Commonwealth Developers, filed its return of income for AY 2006-07. An order under Section 143(3) was passed. The CIT invoked Section 263, setting aside the order and directing the AO to re-examine the deduction claim under Section 80-IB(10) amounting to Rs. 1,71,24,680. The AO disallowed the deduction, holding that row villas with independent units and no common areas did not qualify. The CIT(A) deleted the disallowance. The Revenue appealed to the ITAT, which allowed the appeal, holding that while common areas were not a condition, the rear courtyard of the row house should be included in the built-up area, exceeding the 1500 sq ft limit. The assessee is now appealing this ITAT order.

What were the issues?

1. Whether the rear courtyard enclosed by walls of a residential unit can be included as built-up area of the residential unit, as per Section 80-IB(10) of the Income Tax Act, 1961? - Assessee's contention: The courtyard, being open to the sky, cannot be considered 'built-up area' as nothing is built therein. Excluding it keeps the unit below 1500 sq ft, making it eligible for deduction. - Revenue's contention: The courtyard is enclosed by a compound wall, in exclusive use, and thus should be included in the 'built-up area'. The ITAT's finding of fact on the area cannot be interfered with. 2. Whether the learned Tribunal can inquire into and get measured the courtyard which was not included in the built-up area and which is not the lis between the parties? - The judgment does not record specific arguments from either side on this procedural question, but it is implicitly addressed by the court's examination of the built-up area.

Which sections of the Income-tax Act were involved?

Section 80-IB(10),Section 80-IB(14)(a),Section 143(3),Section 263

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, .

(i)

The appeal is allowed. (ii) The impugned judgment dated 13.09.2013 passed by the learned Income Tax Appellate Tribunal is quashed and set aside. (iii)

The appeal stands disposed of accordingly. F. M. REIS, J SMT. R. S. DALVI, J at*

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