ACIT vs. M/S PRASANNA DEVELOPERS,

Brief facts of the case are that the assessee-firm, which is engaged in the business of real estate, construction of M/s.Prasanna Developers Page 2 of 5 residential/business complexes and execution of housing projects, had filed its return of income for the relevant assessment year claiming profits derived from a project called ‘Maharaja Heights’ as exempt u/s 80-IB(10) of the Act. A survey was conducted on the group on 14/3/2012 and certain incriminating evidence was found and impounded. During the assessment proceedings u/s 143(3) of the Act, the Assessing Officer (AO) observed that the assessee-firm had executed one project named ‘Maharaja Heights’ during the relevant previous year and that the said project consisted of 66 flats/apartments with different dimensions as mentioned in the Deed of Declaration to be executed as per the Karnataka Apartment Ownership Act, 1972. Observing that the profits made from the above project amounting to Rs.13,16,14,188/- have been claimed as deduction u/s 80-IB(10) of the Act, the AO observed from the dimensions of various apartments and the Deed of Declaration, that out of the total 66 flats/apartments, 12 flats bearing registered flat Nos.101 to 104, 1101 to 1104 and 1601 to 1604 were of the dimension of 1498 sq.ft. or more along with private terrace. He observed that the private terraces were not included for calculating the maximum built up area. Observing that these private terraces were for exclusive use of these flat owners, the AO observed that the built up area of these flats exceeded 1500 sq.ft. and therefore there was violation of the provisions of 80-IB(10). He further recorded a statement of the M/s.Prasanna Developers Page 3 of 5 Town Planning Officer of the Mangalore City Corporation u/s 131 of the Act under oath to verify as to the part of the built-up area. Thereafter, show cause notice was issued to the assessee as to why deduction under section 80-IB(10) should not be denied. The assessee submitted that the area marked as private terrace was not to be included for calculating the maximum built up area as this was not a balcony or projection as defined under sub section (4) of sec. 80-IB(10) but it was a terrace and therefore it should not be included in the built-up area. The assessee also placed reliance upon the judgment of the Hon’ble jurisdictional High Court in the case of CIT vs. Raghavendra Construction (208 Taxman 366). The AO was, however, not convinced with the assessee’s contention and held that proportionate disallowance is to be made. He, accordingly, disallowed a sum of Rs.2,39,29,852/- and brought it to tax.

Aggrieved, assessee preferred an appeal before the CIT(A) who allowed the same and the revenue is in appeal before us.

Learned Departmental Representative supported the order of the AO and submitted that the assessee had constructed the apartment and that in respect of 12 flats, the exclusive right of private terrace was given to the respective flat owners and therefore, according to him, the area of terrace is also to be considered as the built-up area of the flat and since the built up

Having regard to the rival contentions and the material on record, we find that the only dispute is with regard to the includibility of the open terrace in the built up area of the flats which had the exclusive approach and right to use such open terrace. We find that this issue has been considered at length by the Pune bench of this Tribunal in the case of Naresh T.Wadhwani (cited supra) wherein, by following the judgment of the Hon’ble Madras High Court in the case of Ceebros Hotels Pvt. Ltd. vs. DCIT, Tax Case No.581 of 2008 dated 19/10/2012, it was held that flats located on 7th floor which had the advantage of exclusive open terrace cannot be considered to have exceeded 1500 sq.ft. and would not be included in the calculation of built

In the result, the revenue’s appeal is dismissed.