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Facts
The Revenue appealed against the CIT(A)'s order allowing a deduction claim under Section 80IBA of the Income Tax Act. The assessee, a real estate developer, claimed deduction based on carpet area of residential units being less than 60 sq. mtrs, as defined by RERA. The Assessing Officer disallowed the deduction, considering a marketing brochure's floor plan which allegedly showed a larger carpet area.
Held
The Tribunal held that the carpet area as defined under RERA and verified by the local authority through Building Use (BU) permission and engineer's certificate should be considered. The brochure's measurements were for marketing and not definitive.
Key Issues
Whether the carpet area calculation for Section 80IBA deduction should be based on RERA-compliant plans and authority approvals, or on marketing brochures.
Sections Cited
143(3), 80IBA, 2(k), 80-IB(10)
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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH
Before: DR. BRR Kumar & Shri T. R. Senthil Kumar
Date of hearing : 20-03-2025 Date of pronouncement : 26-05-2025 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Revenue as against the appellate order dated 16.08.2024 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as “CIT(A)”), arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year 2020-21.
A.Y. 2020-21 Page No 2 ITO Vs. Kavish Infrastructure
Brief facts of the case is that the assessee is a firm engaged in the business of construction of residential apartment namely “Karnavati Riviera” and “Karnavati Skylane”. For the Asst. Year 2020-21, assessee filed its Return of Income on 19-01-2021 declaring Nil income. The return was taken scrutiny assessment, the Assessing Officer held that the claim of deduction of Rs.5,15,64,217/- made u/s. 80IBA of the Act on the ground that the carpet area as per the floor plan of the building exists 60 Sq. Mtrs. The assessee explained as per section 2 clause (k) of Real Estate (Regulation and Development) Act, 2016, carpet area does not include exclusive area, verandah area. As per the above definition, the carpet area to claim deduction u/s. 80IBA of the Act is 60 Sq. Mtrs. which is equivalent to 645.83 Sq. Ft. The Ld. A.O. has taken into consideration the brouacher of the floor plan available on the intermediary website, which shows that the measurement of the floor plan in Square Feet which is not exactly the carpet areas as defined under the Real Estate (Regulation and Development) Act, 2016. The brouacher available on the website is just for marketing purpose and the broacher shows the wash area as 6’6’’ x 4’9” which is in fact a balcony area, however the provision for the washing area is available to the members. The kitchen and dining area as mentioned in the brouacher is 16’3 x 10’3” which includes balcony/wash area 6’6 x 4’9”. Thus the total calculation comes to 620.85 Sq. ft. which is less than 645.83 Sq.ft. on 60 Sq. Mtrs. Thus the assessee is eligible for claim of deduction u/s. 80IBA of the Act. The above explanation was not accepted by the A.O. and has not verified the measurement of the flats through A.Y. 2020-21 Page No 3 ITO Vs. Kavish Infrastructure District Valuation Officer, however denied the claim of deduction and demanded tax thereon.
Aggrieved against the assessment order, assessee filed an appeal before Ld. CIT(A). After considering the submissions of the assessee with supporting documents and judicial precedents, Ld. CIT(A) allowed the claim of deduction by observing as follows: “5.2 I have carefully gone through the grounds of appeal
, facts of the case, assessment order passed by the AO, written submissions and supporting documents uploaded as well as judicial decisions relied upon by the appellant. AO has made the impugned addition on the ground that carpet area as per the floor plan under the project of Karnavati Riviera residential unit is worked out at 651.68 Sq. ft (682.56 -30.88), even after presuming that the wash area is already included in the Kitchen/Dining Area, as claimed by the assessee, which is equivalent to 60.54 Sq. meters, which is more than
60. Sq. meters, to be eligible to claim the deduction U/s 80IBA. It has further been noted by the AO that definition of carpet area includes the area covered by internal partition walls. However, in the calculation made by the AO for arriving the carpet area, even the area covered by internal walls are not included. If the area covered by these internal walls are also included, the net carpet area will be more than the above calculated value of 682.56 Sq. ft. which is 63.412 square meters and it exceeds sixty square meters and hence, appellant's project doesn't qualify for the deduction U/s 80IBA. 5.3 On the other hand, it is the contention of the appellant that AO has taken into consideration the broacher of the floor plan available on the intermediary website which shows that the measurement of the floor plan in Square Feet which is not exactly the carpet area as defined under the Real Estate (Regulation and Development) Act, 2016. The Broacher available on the website is just for the marketing purpose and the broacher shows the wash area as 6'6" x 4'9" which is in fact a balcony area, however the provision for the washing area is available to the members. The kitchen and dining area as mentioned in the broacher is 16'3 x 10'3" which includes balcony/wash area 6'6 x 4'9". Further, in the calculation made by the AO, wash area (Balcony area) which has already been included in the area mentioned for kitchen and dining and wash area (Balcony area) is in fact balcony which is required to be excluded. Hence, after deducting the wash area (balcony area) included two times in the A.Y. 2020-21 Page No 4 ITO Vs. Kavish Infrastructure calculation made by the AO for arriving the carpet area, then it comes to 620.80 Sq. Ft [682.56-61.76 (30.88 x 2)] which is 57.70 Sq. Mtr. 5.4 Before adjudicating the issue, it is imperative to discuss the carpet area as per the provision of section 80-IBA. Clause(a) of Sub-section (6) of section 80-IBA define the "carpet area" for the purpose of claiming deduction u/s 80-IBA as under. (a) "carpet area" shall have the same meaning as assigned to it in clause (k) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16) of 2016)." Further Clause(b) of Sub-section (6) of section 80-IBA define the "competent authority" for the purpose as under: (b) "competent authority" means the authority empowered to approve the building plan by or under any law for the time being in force;" It is an admitted fact on record that the housing project of the appellant namely "Karnavati Rivera" is registered under RERA and same housing project scheme has also been approved by the local authority Ahmedabad Municipal Corporation (AUDA), wherein the carpet area as per the RERA regulation for the unit has been mentioned 59.49 Sq. Mtr. Subsequently, BU (Building Use) Permission of the same residential project of the appellant has also been granted. As per the approved plan also, carpet area of the unit of Block- A is 59.49 Sq. Mtr. Therefore, contention of the appellant is that the BU permission has been granted by the Competent Authority after verification of the entire project and after measuring the carpet area as shown in the approved plan of the housing project. Hence, the carpet area as shown in the approved plan is the actual carpet area after construction which is duly verified by the local authority and the said carpet area is as per the definition of RERA Regulation. In support of its contention, appellant has also uploaded the floor plan of the unit showing carpet area calculation duly certified by the Registered Engineer of the unit of Block A, which comes out to be 59.49 Sq. Mtr. (which is less than 60 Sq. Mtr.) and also as per plan approved by the local authority which is as per RERA regulation. Appellant has further submitted that during the video conferencing, AO has called for few sale deeds of housing unit sold in the scheme Karnavati Rivera, which were uploaded during the course of assessment proceedings. Appellant firm has also uploaded the same sale deeds of residential unit sold in the scheme A.Y. 2020-21 Page No 5 ITO Vs. Kavish Infrastructure
Karnavati Rivera on sample basis, which is on record. Lastly, in support of its contention, appellant has relied upon the decision of Hon'ble Supreme Court, in the case of Principal Commissioner of Income-tax vs. Vardhan Builders, (2023) 155 taxmann.com 391 (SC), wherein Hon'ble Bombay High Court has held that the benefit of deduction under section 80-IB(10) could not be denied. Assessee was claiming deduction on the basis of approved plans of BMC, occupancy certificate Issued by BMC, possession letters and agreements for sale of flats entered into with Individual buyers. As per approved plans of BMC and as per possession certificate issued to buyers of flats, buyers had been given possession separately for each of individual flats cannot be denied, as there was no evidence on record to indicate that assessee had combined two or more flats and completion certificate was issued by competent authority, which could not have been issued if there was any violation of approved plans by municipal authorities. SLP filed by revenue against said impugned order of High Court dismissed by the Hon'ble Supreme Court. 5.5 Having considered the above submission and details submitted by the appellant, I am of the view that appellant has successfully demonstrated and explained that it is fully eligible for the deduction u/s 80IBA of the Act. The carpet area of the residential unit in the housing project of the appellant firm is 59.49 Sq. Mtr which is well within the prescribed limit as per the conditions provided in the section 801BA. Carpet area has also been verified by the local authority while giving BU Permission as per the documents uploaded by the appellant during the course of assessment proceedings as well as appellate proceedings. The carpet area calculated by the Engineer for the unit is as per RERA Act, Section 2(k) of the RERA Act 2016 which is well below 60 sq. mtr, and one of the primary condition u/s.80IBA of the Act. As discussed above, carpet area shall have the same meaning as per provisions of section 801BA as assigned to Clause-k of Section 2 of RERA Act, 2016. From the perusal of documents uploaded by the appellant, it is evident that the carpet area of unit is less than 60 sq. mtr of housing project namely "KARNAVATI RIVERA" as per the approved plan passed by the competent authority and also as per the working given in the Engineer's Certificate. All these relevant details was also available with the AO before passing the assessment order. However, AO has made the impugned. addition denying the deduction u/s.80IBA of the Act claimed by the AO. Further, judicial decisions relied upon by the appellant is also squarely applicable in the case, as deduction has been claimed on the basis of approved plans and occupancy certificate issued by AUDA, possession letters as well as sale of flats entered into with individual buyers.
A.Y. 2020-21 Page No 6 ITO Vs. Kavish Infrastructure 5.6 In view of the above facts and submission uploaded by the appellant, I don't find any reason to concur with the finding of the AO. Thus, the addition of Rs. 5,15,64,217/- made by the AO disallowing of deduction claimed u/s. 80IBA of the Act on the ground that carpet area as per the floor plan of the building exceeds sixty square meters is deleted. Thus, Ground no. 3, 4, 5, 6, 7, 8, 9 and 10 of appeal raised by the appellant is allowed.”
Aggrieved against the same, the Revenue is in appeal before us raising the solitary Ground of appeal:
1 Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the addition of Rs 5,15,64 217/- on account of disallowance of claim of deduction u/s. 80IBA of the Act without appreciating the fact of the case?"
5. During the course of hearing, Ld. Sr. D.R. in support of the grounds claimed that the Ld. CIT(A) is not justified in allowing the deduction u/s. 80IBA of the Act and therefore requested to sustain the addition made by the Assessing Officer. In support of the same, Ld. D.R. has not furnished any document or material before us.
Per contra, Ld. Counsel appearing for the assessee submitted before us that the project “Karnavati Riviera” is a 2 BHK residential project comprising of 448 residential units which is located outskirts of Ahmedabad in a developing area far away from the City. Ld. Counsel also submitted that details of sales of residential units assessment year-wise and the claim of deduction under 80IBA as follows: Karnavati Riveria Asst. unit sold total revenue Profit 80IBA Deduction Year 2017-18 0 0 0 0 2018-19 0 0 -181796 0 A.Y. 2020-21 Page No 7 ITO Vs. Kavish Infrastructure
2019-20 82 205000000 52820066 51564217 2020-21 90 221585000 41720588 40885883 2021-22 137 332310000 45979841 45979841 2022-23 72 181937500 20770921 23372067 2023-24 46 121600000 18528289 18812299 6.1. Ld. Counsel further submitted regular assessment is completed only for the Asst. year 2020-21 and the for the subsequent Asst. Years only 143(1) was made by the department and produced copies of the intimations. The appellate order passed by Ld. CIT(A) being a detailed order after verification of the Sale Deeds with floor plan and judicial precedents relied thereon, approval given by Competent Authorities under RERA and AUDA as well as the findings arrived by the Ld. CIT(A) does not require any interference and the department appeal is liable to be dismissed.
We have given our thoughtful consideration and perused the materials available on record. The Ld. CIT(A) has decided the appeal after verification of the records, Sale deeds and floor plan submitted by the assessee. The Assessing Officer before making disallowance u/s. 80IBA ought to have referred the matter to the District Valuation Officer to verify the measurements of the residential flats which was not done by the A.O. But simply relying on the broachers supplied by the assessee firm denied the benefit to the assessee. That apart the Revenue could not place on record any material that the floor area is exceeding 60 Square Mtrs. Whereas the Local Authority issued Building Use (BU) Certificate A.Y. 2020-21 Page No 8 ITO Vs. Kavish Infrastructure which also fulfill the definition of Section 2 (k) of the RERA Act which are lesser than 60 Sq. Mtrs. as prescribed u/s. 80IBA of the Act.
In the absence of any material evidence or DVO’s report from the Revenue, we have no hesitation in confirming the order passed by Ld. CIT(A) and therefore the ground raised by the Revenue is devoid of merits and liable to be dismissed.
In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 26-05-2025 Sd/- Sd/- (DR. BRR KUMAR) (T.R. SENTHIL KUMAR) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad : Dated 26/05/2025 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद