In a significant ruling, the ITAT Chennai held that the private open terrace attached with residential unit would form part of built-up area for the purpose of computing deduction under section 80-IB(10) of the Income Tax Act if the same was included in the house project approved by the local authority.
The assessee, M/s Acestar properties Pvt Ltd, is engaged in the business of promoting housing projects. In the present case, the assessee has constructed nearly 426 residential units. All the residential units in the first floor have private open terrace ranging from 100 to 700 sq.ft.
The Revenue contended that the private open terrace is for exclusive use of attached residential units. The access to private open terrace is only from residential units as opening doors provided only from residential units like from bedroom, halls, etc. The private open terrace was sold to the owners for their exclusive use, therefore, it was contended that the private open terrace is nothing but a built-up area as provided in Section 80-IB(10) of the Income Tax Act. and therefore, the floor space index exceeds 1500 sq.ft., hence, the assessee is not eligible for deduction under Section 80-IB(10) of the Income Tax Act.
The assessee, on the other hand, relied on the decision in Ceebros Hotels Pvt. Ltd, and submitted that the open terrace has to be excluded and it cannot be treated as built-up area.
Analyzing the ratio laid down in the decision of Madras High Court, the bench opined that it is necessary to examine the housing project approved by the local body. “In other words, whether the so-called private open terrace said to be attached with private residential unit would form part of built-up area as per housing project or it was excluded from the approval granted by local authority.”
Remitting the matter back to the files of the AO, the bench said that “Moreover, from the order of the Assessing Officer it appears that in each floor there is a projection, which was termed as “private open terrace”. The entry to such open terrace is only from inside the residential unit. It is not open to other residents to enter that place. Therefore, it is not a common area like open terrace. In view of the above, this Tribunal is of the considered opinion that the matter needs to be re-examined and bring on record whether the so-called private open terrace forms part of built-up area in the approval given by local authority or not. Since the approval of local authority is not available on record, the matter needs to be reconsidered.”
Read the full text of the order below.
