M/s Raghavendra Constructions, Bangalore V. ITO, Bangalore

ITA 425/BANG/2012

• Counselvise Citation: 42521114 RSA 2012
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 26-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Condonation of delay
• Section: 133A; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.425/BANG/2012 ASSESSMENT YEAR : 2007-08 M/S. RAGHAVENDRA CONSTRUCTIONS, NO.42/6, FLAT NO.1, ASTER BLOCK, MARATHAHALLI, BANGALORE 560 037. PAN : AAIFR 1301B VS. THE INCOME TAX OFFICER, WARD 7(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI NARENDRA SHARMA, ADVOCATE RESPONDENT BY : SHRI FARAHAT HUSSAIN QURESHI, CIT-II(DR) DATE OF HEARING : 06.12.2012 DATE OF PRONOUNCEMENT : 14.12.2012 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER DATED 18.02.2010 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSE SSMENT YEAR 2007-08. 2. THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN TH E BUSINESS OF DEVELOPING AND CONSTRUCTING APARTMENTS. FOR THE A. Y. 2007-08, THE ASSESSEE FILED A RETURN OF INCOME DECLARING NIL INC OME AFTER CLAIMING ITA NO.425/BANG/2012 PAGE 2 OF 14 DEDUCTION U/S. 80IB(10) OF THE INCOME TAX ACT, 1961 (ACT). THE ASSESSEE HAD CLAIMED DEDUCTION U/S. 80IB(10) OF THE ACT OF Q 18,36,78,280. THE ASSESSEE HAD DEVELOPED A PROJECT BY NAME PARAMOUNT RAGHAVENDRA ARISHT ON A PLOT OF LAND MEASURING 2 ACRES IN SY.N O.42/6, MUNNEKOLALU, VARTUR HOBLI, BANGALORE (EAST). THE ASSESSEE HAD B UILT ABOUT 160 FLATS. 3. THERE WAS A SURVEY U/S. 133A OF THE ACT CONDUCTE D ON 03.10.2007 AT THE PROJECT SITE. ONE OF THE CONDITIONS FOR GRANT OF DEDUCTION U/S. 80IB(10) OF THE ACT WAS THAT THE BUILT-UP AREA OF EACH OF TH E FLATS IN THE APARTMENT SHOULD NOT EXCEED 1500 SQ.FT. THE AO REFERRED THE QUESTION WITH REGARD TO BUILT-UP AREA OF EACH FLAT TO THE DVO. THE DVO SUB MITTED HIS REPORT ON 06.11.2007. AS PER THE DVOS REPORT, THE FOLLOWING 16 FLATS HAD A BUILT-UP AREA WHICH WAS IN EXCESS OF 1500 SQ.FT. FLAT NOS. BLOCK 1, 2, 3 & 4 A 5, 6, 7 & 8 B 1, 2, 3 & 4 C 5, 6, 7 & 8 D 4. THE DVO IN COMPUTING THE BUILT-UP AREA OF THE FL ATS, ALSO INCLUDED BALCONY AREA. ACCORDING TO THE AO, THE BALCONY ARE A SO INCLUDED WAS UNDER THE EXCLUSIVE POSSESSION OF THE FLAT OWNERS. THE ASSESSEE HOWEVER WAS CONTENDING THAT THE BALCONY AREA WAS A COMMON A REA TO BE ENJOYED BY THE OTHER FLAT OWNERS AS WELL AND THEREFORE SHOU LD NOT BE RECKONED FOR THE PURPOSE OF ARRIVING AT THE BUILT-UP AREA OF EAC H FLAT. ITA NO.425/BANG/2012 PAGE 3 OF 14 5. THE ASSESSING OFFICER HELD THAT SINCE THE BUILT- UP AREA OF EACH OF THE FLATS WAS NOT 1500 SQ.FT. OR LESS, THE ASSESSEE WAS NOT ENTITLED TO GET DEDUCTION U/S. 80IB OF THE ACT. 6. ON APPEAL BY THE ASSESSEE, THE CIT(APPEALS) HELD THAT ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S.80-IB(10) OF THE AC T ON THE PROFITS OF THE PROJECT AFTER EXCLUDING THE PROFITS ATTRIBUTABLE TO THE 16 FLATS WHICH ARE SAID TO BE OF AN AREA OF ABOVE 1500 SQ.FT. THE RELEVANT FINDINGS OF THE CIT(A) WERE AS FOLLOWS:- 5.0. I HAVE PERUSED THE ASSESSMENT ORDER, THE RE LEVANT RECORDS, THE BASIC DOCUMENTS AS ALSO VARIOUS CASE LAWS CITED . 5.1. THE DEDUCTION U/S. 80IB IS MAINLY BASED ON TH E BUILT AREA OF THE FLAT. SUB CLAUSE-A OF SUBSECTION 14 OF SECTION 80IB DEFIN ES BUILT AREA AS UNDER :- (A) BUILT-UP AREA MEANS THE INNER MEASUREMENTS O F THE RESIDENTIAL UNIT AT THE FLOOR LEVEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREASED BY THE THICKNESS OF THE WAL LS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENT IAL UNITS; 6.0. IT IS NO DOUBT TRUE THAT THE COMMON AREAS SHA RED WITH OTHER RESIDENTIAL UNITS ARE TO BE EXCLUDED FOR CALCULATIN G BUILT UP AREA. THE WORDS COMMON AREA SHARED WITH OTHER RESIDENTIA L UNITS ONLY MEAN THAT SUCH AREA SHOULD BE ACCESSIBLE TO AL L THE USERS/OCCUPIERS OF THE RESIDENTIAL UNITS OF THE COM PLEX. THEREFORE, TO FIND OUT THE EXACT POSITION OF THE DISPUTED 16 F LATS THE PLAN OF THE AREA WAS CALLED FOR. FROM THE PERUSAL OF THE DR AWING OF THE PLAN, IT IS CLEAR THAT IN EACH OF THE DISPUTED FLAT THERE IS A COMMON AREA BETWEEN 2 FLATS WHICH IS ACCESSIBLE FROM INSID E THE FLATS BY OWNER/OCCUPIER OF THESE 2 FLATS ONLY. THE OTHER OWN ERS OF THE COMPLEX / BUILDING DO NOT HAVE ANY ACCESS TO THIS C OMMON AREA. THEREFORE, IT IS DIFFICULT TO ACCEDE TO THE CLAIM O F THE APPELLANT THAT THE PLINTH AREA OF THE BALCONIES AS REFERRED T O BY ASSESSING OFFICER IN PARA 7 OF HIS THIS ORDER ARE TO BE EXCLU DED FOR CALCULATING THE BUILT UP AREA OF THE RESPECTIVE FLA TS. ITA NO.425/BANG/2012 PAGE 4 OF 14 7.0. THEREFORE THE APPELLANT FAILS ON THIS POINT. THE ASSESSING OFFICER HAS RIGHTLY HELD THAT FOR THE 16 FLATS THER E IS A VIOLATION OF THE CONDITIONS LAID DOWN IN SECTION 801B(10) IN AS MUCH AS THE BUILT AREA OF EACH OF THE FLAT EXCEEDS 1500 SQUARE FEET. 8.0. THE APPELLANT HAS ALSO MADE DETAILED AND ELAB ORATE SUBMISSIONS ON THE ALTERNATE GROUND, THAT IN THE EV ENT IT IS HELD THAT THERE IS VIOLATION OF CONDITION OF 80IB(10) IN RESPECT OF THESE 16 FLATS THEN THE DEDUCTION IS TO BE RESTRICTED ONL Y FOR THE PROFIT PROPORTIONATE TO THE AREA COVERED BY THESE FLATS. F OR THIS PROPORTION, APART FROM OTHER TRIBUNAL ORDERS THE BR IGADE ENTERPRISES IN ITA NO.1198(BANG)/2007 DATED 29-08-2 008, WHEREIN IT IS HELD THAT THEREFORE, IF A PARTICULAR UNIT SATISFIES THE CONDITION OF 80IB, THE ASSESSEE IS ENTITLED FOR DED UCTION. SO CONSIDERED, IT IS ONLY IN RESPECT OF THOSE UNITS WH ICH HAVE NOT FULFILLED THE STIPULATED CONDITIONS, DEDUCTION SHOU LD BE DENIED. THE APPELLANT ALSO RELIED UPON THE JURISDICTIONAL T RIBUNALS DECISION OF BANGALORE A BENCH, IN THE CASE OF M/S . MYSTIC INVESTMENT IN ITA 1170/BANG/2007 DATED 25-04-2008. THE APPELLANT, FURTHER RELIED UPON THE HONBLE ITATS D ECISION IN THE CASE OF SJR BUILDERS IN ITA NO.1192/BANG/2008 DATED 21-08- 2009 OF BANGALORE A BENCH, WHEREIN IT IS HELD THA T WE HOLD THAT IN RESPECT OF THE PENT HOUSES THE BUILT-UP ARE A OF WHICH IS MORE THAN 1500 SFT, THEY MAY BE EXCLUDED FOR EXEMPT ION. HOWEVER, IN THE LIGHT OF THE DECISION OF THE SPECIA L BENCH IN THE CASE OF BRAHMA ASSOCIATES (SUPRA), MERELY BECAUSE S OME FLATS ARE LARGER THAN 1500 SFT, THE ASSESSEE WILL NOT LOST TH E BENEFIT IN ITS ENTIRETY. ONLY WITH REFERENCE TO THE FLATS WHICH HA S MORE THAN THE PRESCRIBED, THE ASSESSEE WILL LOSE THE BENEFIT. 9.0. FOLLOWING THE BINDING PRECEDENT OF HONBLE ITA T BANGALORE BENCH, I HOLD THAT THE RESTRICTION FOR DEDUCTION U/ S. 8OIB OF INCOME-TAX ACT, 1961 IS TO BE MADE ONLY WITH REFERE NCE TO AREA OFTHESE 16 FLATS WHOSE BUILT UP AREA IS MORE THAN THE PRESCRIBED LIMIT OF 1500 SQ.FT. ACCORDINGLY, I DIRECT THE ASSE SSING OFFICER TO PROPORTIONATELY CALCULATE THE DISALLOWANCE TO BE MA DE U/S. 80IB FOR IN PROPORTION TO THE AREA OF THESE 16 FLATS AND RESTRICT THE DISALLOWANCE U/S. 8OIB OF INCOME-TAX ACT, 1961 ONLY TO THE SAME. FOR THE BALANCE AREA, THE APPELLANT WOULD BE ENTITLED TO THE DEDUCTION U/S. 80IB OF INCOME-TAX ACT. 1961. 7. ON APPEAL BY THE REVENUE AGAINST THE ORDER OF CI T(A) ALLOWING PROPORTIONATE DEDUCTION U/S.80-IB(10) OF THE ACT, T HE TRIBUNAL CONFIRMED THE ITA NO.425/BANG/2012 PAGE 5 OF 14 ABOVE ORDER OF THE CIT(A). AGAINST THE ORDER OF TH E TRIBUNAL ALLOWING PROPORTIONATE DEDUCTION U/.S 80IB OF THE ACT, THE R EVENUE PREFERRED APPEAL BEFORE THE HONBLE HIGH COURT OF KARNATAKA IN ITA N O.177/2011 AND THE HONBLE HIGH COURT OF KARNATAKA BY ITS ORDER DATED 28.02.2012 DISMISSED THE APPEAL OF THE REVENUE. THE HONBLE KARNATAKA H IGH COURT ALSO WENT INTO THE QUESTION OF BUILT-UP AREA OF THE 16 FLATS AND HAS OBSERVED AS FOLLOWS:- 6. THEREFORE THE SUBSTANTIAL QUESTION OF LAW THAT ARISES FOR CONSIDERATION IN THIS APPEAL IS:- TO BE ELIGIBLE FOR EXCLUSION FROM THE BUILT UP AREA, WHETHER THE COMMON AREAS HAVE TO BE SHARED WITH ALL THE RESIDENTS, WHO HAVE OCCUPIED THE RESIDENTIAL UNITS, OR EVEN IF IT IS SHARED WITH ONE , THE ASSESSEE WOULD BE ENTITLED TO THE SAID BENEFITS? 7. THE CIRCULAR NO.5/10 DATED 3.6.2010 ISSUED BY TH E CENTRAL BOARD OF DIRECT TAXES EXERCISING THE POWER UNDER SE CTION 119 OF THE ACT EXPLAINS RATIONALIZING THE PROVISIONS OF DE DUCTION UNDER SECTION 80-IB(10). THE PRINCIPLE OBJECT BEHIND THE PROVISION IS TO PROVIDE FOR 100% DEDUCTION OF THE PROFITS DERIVED B Y AN UNDERTAKING FROM DEVELOPING AND BUILDING HOUSING PR OJECTS. IN ORDER TO BE ELIGIBLE FOR THE SAID BENEFIT, THE ASSE SSEE SHOULD SATISFY THE FOLLOWING CONDITIONS:- (A) THE PROJECT HAS TO BE APPROVED BY THE LOCAL AUTHORITY BEFORE 31.3.2007; (B) THE PROJECT IS CONSTRUCTED ON A PLOT OF LAND H AVING A MINIMUM AREA OF ONE ACRE; (C) THE BUILT-UP AREA OF EACH RESIDENTIAL UNIT SHO ULD NOT EXCEED 1,500 SQ.FT. IN THE CITIES OF DELHI AND MUMBAI (INCLUDING AREAS FALLING WITHIN 25 KMS. OF MUNICIPAL LIMITS OF THESE CITIES) AND 1,500 SQ.FT. IN OTHER PLACES; (D) THE BUILT-UP AREA OF THE SHOPS AND OTHER COMMERCIAL ESTABLISHMENTS INCLUDED IN THE HOUSING PROJECT SHOULD NOT EXCEED 5% OF THE TOTAL BUILT-UP ITA NO.425/BANG/2012 PAGE 6 OF 14 AREA OF THE HOUSING PROJECT OR 2,000 SQ.FT. WHICHEVER IS LESS. (E) THE PROJECT HAS TO BE COMPLETED WITHIN FOUR YE ARS FROM THE END OF THE FINANCIAL YEAR IN WHICH THE PROJECT IS APPROVED BY THE LOCAL AUTHORITY. ONCE THESE CONDITIONS ARE FULFILLED, THE ASSESSEE W OULD BE ENTITLED TO THE BENEFIT FLOWING FROM THE AFORESAID PROVISION. BY A SUBSEQUENT AMENDMENT, THE PROJECT APPROVAL BY THE LOCAL AUTHORITY WAS EXTENDED TO 31.3.2008. THE OBJECT OF THE AFORESAID TAX CONCESSION IS TO PROVIDE TAX BENEFIT TO THE PERSON UNDERTAKING THE INVESTMENT RISK I.E., THE AC TUAL DEVELOPER. HOWEVER, ANY PERSON UNDERTAKING PURE CO NTRACT RISK NOT ENTITLED TO THE TAX BENEFITS. WITH A VIEW TO CLARIFY ACCORDINGLY, AN EXPLANATION AFTER SUB-SECTION (1) O F SECTION 80-IB HAS BEEN INSERTED SO AS TO PROVIDE THAT NOTHI NG CONTAINED IN SUB-SECTION SHALL APPLY TO ANY UNDERTA KING WHICH EXECUTES THE HOUSING PROJECT AS A WORKS CONTRACT AW ARDED BY ANY OTHER PERSON INCLUDING CENTRAL OR STATE GOVERNM ENT. THIS AMENDMENT HAS BEEN MADE APPLICABLE WITH RETROS PECTIVE EFFECT FROM 1 ST APRIL, 2001 AND WILL ACCORDINGLY APPLY IN RELATION TO ASSESSMENT YEAR 2001-02 AND SUBSEQUENT ASSESSMENT YEARS. FURTHER, THE OBJECTIVE OF THE TA X BENEFIT FOR HOUSING PROJECTS IS TO BUILD HOUSING STOCK FOR LOW AND MIDDLE INCOME HOUSEHOLDS. THIS HAS BEEN ENSURED BY LIMITI NG THE SIZE OF THE RESIDENTIAL UNIT. THEREFORE, WHILE INT ERPRETING SECTION 80-IB(10) THIS OBJECT HAS TO BE KEPT IN MIN D AND IF THERE IS ANY AMBIGUITY OR DIFFICULTY, IT IS THE SUB STANCE, WHICH HAS TO PREFERRED TO THE FORMAT. KEEPING IN MIND TH E FACT THAT WHILE IMPLEMENTING THESE PROJECTS AT THE GROUND LEV EL, THE BUILDERS ENCOUNTERED INNUMERABLE PROBLEMS. IF THER E ARE MINOR DEFECTS IN THE CONSTRUCTION PUT UP, WHICH IS UNINTENTIONAL OR BY WHICH THEY HAVE NOT MADE ANY SP ECIAL GAINS OF MONEY, THE BENEFIT WHICH IS ACCRUED TO THE M UNDER THIS PROVISION SHOULD NOT BE DENIED ON THAT SCORE F OR THE MAIN OBJECT SOUGHT TO BE ACHIEVED BY INTRODUCTION OF THI S PROVISION IS ACHIEVED WHILE CONSIDERING THE CLAIM FOR BENEFIT UNDER THIS PROVISION, THE AUTHORITIES SHOULD LEAN IN FAVOUR OF ENCOURAGING SUCH HOUSING PROJECTS AND NOT DISCOURAG ING THE PERSONS FROM TAKING UP SUCH HOUSING PROJECTS. IT IS IN THIS CONTEXT PROBABLY THAT OBSTACLES WERE PUT IN ASSESSE ES GETTING THE BENEFIT, THE LEGISLATURE INTRODUCED THE DEFINIT ION OF BUILT- UP AREA, WHICH IS VERY CRUCIAL FACTOR IN DETERMININ G THE BENEFIT OF TAX TO THE ASSESSEE, WHICH READS AS UNDE R:- ITA NO.425/BANG/2012 PAGE 7 OF 14 14(A) BUILT-UP AREA MEANS THE INNER MEASUREMENT OF THE RESIDENTIAL UNIT AT THE FLOOR LE VEL, INCLUDING THE PROJECTIONS AND BALCONIES, AS INCREAS ED BY THE THICKNESS OF THE WALLS BUT DOES NOT INCLUDE THE COMMON AREAS SHARED WITH OTHER RESIDENTIAL UNITS. 8. THEREFORE THE INTENTION IS CLEAR. IN CALCULATI NG THE BUILT UP AREA IT IS ONLY THE INNER MEASUREMENTS OF THE RE SIDENTIAL UNIT ON THE FLOOR LEVEL, WHICH HAS TO BE TAKEN INTO CONSIDERATION. IF THERE ARE ANY PROJECTIONS AND BA LCONIES AND IF IT EXHAUSTIVELY BELONGS TO THE RESIDENTIAL UNITS , THEN, THAT ALSO HAS TO BE TAKEN INTO CONSIDERATION FOR DECIDIN G THE BUILT UP AREA. HOWEVER, IF THE SAID RESIDENTIAL UNIT IS P ROVIDED THE FACILITY OF COMMON AREAS SHARED WITH OTHER RESIDENT IAL UNITS SUCH COMMON AREAS HAVE TO BE EXCLUDED WHILE COMPUTI NG THE BUILT UP AREA. THE LANGUAGE EMPLOYED IN DEFINING BU ILT UP AREA AS THE COMMON AREA SHARED WITH OTHER RESIDENTI AL UNITS, IT DOES NOT MEAN THAT EVERY COMMON AREA SHOULD BE SHAR ED WITH OTHER RESIDENTIAL UNITS. IF THAT AREA DOES NOT CON CLUSIVELY BELONG TO THE OWNER OF THE RESIDENTIAL UNIT AND IF HE HAS TO SHARE THAT COMMON AREA WITH THE OWNER OF ANOTHER RE SIDENTIAL UNIT, THEN THAT COMMON AREA HAS TO BE EXCLUDED FROM THE BUILT UP AREA. IF THIS PRINCIPLE IS KEPT IN MIND AND APP LIED TO THE FACTS OF THIS CASE, IN RESPECT OF 16 FLATS, THE COM MON AREA IS SHARED BY THOSE 16 OWNERS OF RESIDENTIAL UNITS. IN RESPECT OF A-1 AND A-2 THE COMMON AREA IS SHARED BY THE OWNERS OF FLATS A-1 AND A-2. THIS COMMON AREA IS NOT THE SUBJECT M ATTER OF SALE AS IS CLEAR FROM THE RECITALS IN THE SALE DEED . IN OTHER WORDS, THE OWNERS OF THE RESIDENTIAL UNITS DO NOT H AVE EXCLUSIVE RIGHT TO USE THESE BALCONIES AS THEY HAVE TO SHARE IT WITH OTHERS. IT IS IMMATERIAL WHETHER THEY HAVE TO SHARE IT WITH OTHER 159 OWNERS OF THE RESIDENTIAL UNITS OR T HEY HAVE TO SHARE IT WITH THE ADJOINING OWNER OF THE RESIDENTIA L UNIT, THIS AREA CANNOT BE TAKEN INTO CONSIDERATION TO DECIDE T HE BUILT UP AREA. FROM THE FACTS, IT IS CLEAR THAT IF THIS BAL CONY SPACE IS EXCLUDED ALL THE 160 UNITS ARE LESS THAN 1500 SQ.FT . AND THEREFORE THE ASSESSEE WAS ENTITLED TO 100% TAX EXE MPTION ON THIS PROJECT. HOWEVER, THE APPELLATE AUTHORITY AS WELL AS THE TRIBUNAL HAVE NOT EXTENDED THE SAID BENEFIT TO 16 R ESIDENTIAL UNITS. AS THE ASSESSEE HAS NOT PREFERRED ANY APPEA L AGAINST THE SAID ORDER, IT WILL NOT BE APPROPRIATE FOR THIS COURT TO EXTEND THE SAID BENEFIT IN THESE PROCEEDINGS. HOWE VER, AS THE LAW STANDS TODAY, IN VIEW OF THE INTERPRETATIONS PL ACED BY THEM ON THE AFORESAID PROVISIONS, THE ASSESSEE HAS NOT VIOLATED THE PROVISIONS OF SECTION 80-IB(10) OF THE ACT AND IN FACT WAS ENTITLED TO 100% TAX EXEMPTION ON THE PROF ITS ITA NO.425/BANG/2012 PAGE 8 OF 14 DERIVED FROM THE PROJECT. THEREFORE THE SUBSTANTIA L QUESTION OF LAW FRAMED IS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 9. THEREFORE, WE DO NOT SEE ANY MERIT IN THIS APPEA L AND ACCORDINGLY THE APPEAL IS DISMISSED. NO COSTS. 8. WE HAVE ALREADY SEEN THAT THE CIT(A) DID NOT ALL OW DEDUCTION IN RESPECT OF PORTION OF THE PROJECT VIZ., 16 FLATS WH ICH WERE ACCORDING TO THE REVENUE OF AN AREA OF OVER 1500 SQ.FT. WE HAVE ALS O SEEN THAT THE ASSESSEE WAS CONTENDING THAT THE BALCONY AREA WAS A COMMON AREA TO BE ENJOYED BY THE OTHER FLAT OWNERS AS WELL AND THEREF ORE SHOULD NOT BE RECKONED FOR THE PURPOSE OF ARRIVING AT THE BUILT-U P AREA OF EACH FLAT. THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE CIT(A). THE ASSESSEE DID NOT PREFER ANY APPEAL AGAINST THAT POR TION OF THE ORDER OF CIT(A) BY WHICH DEDUCTION U/S.80-IB(10) OF THE ACT ON PROPORTIONATE PROFITS OF THE PROJECT ATTRIBUTABLE TO THE 16 FLATS WERE NO T ALLOWED. IT CAN ALSO BE SEEN THAT THE HONBLE HIGH COURT OF KARNATAKA IN TH E APPEAL BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL, DEALT WI TH THE ABOVE ISSUE AS TO WHETHER THE CALCULATION OF AREA OF 16 FLATS WAS COR RECT OR NOT AND HAVE HELD THAT THE BALCONY AREA OF THE 16 FLATS CONSIDERED AS PART OF THE BUILT OF AREA OF THE 16 FLATS WERE IN FACT COMMON AREA AND NOT IN THE EXCLUSIVE AREA MEANT FOR THE 16 FLATS ALONE AND THEREFORE SHOULD N OT BE RECKONED FOR CALCULATING THE BUILT OF AREA OF THE 16 FLATS. IF THE BALCONY AREA IS SO EXCLUDED THEN EVEN IN RESPECT OF PROFITS OF THE PR OJECT ATTRIBUTABLE TO THE 16 FLATS, DEDUCTION U/S.80-IB(10) OF THE ACT OUGHT TO BE ALLOWED. ITA NO.425/BANG/2012 PAGE 9 OF 14 9. AFTER THE DECISION OF THE HONBLE KARNATAKA HIGH COURT THE ASSESSEE HAS FILED APPEAL AGAINST THE ORDER OF CIT(A) BY WHI CH DEDUCTION U/S.80- IB(10) OF THE ACT ON PROPORTIONATE PROFITS OF THE P ROJECT ATTRIBUTABLE TO THE 16 FLATS WERE NOT ALLOWED. AS FAR AS THE PRESENT APPE AL BY THE ASSESSEE IS CONCERNED, THERE IS A DELAY IN FILING THE APPEAL. THE IMPUGNED ORDER OF THE CIT(APPEALS) DATED 18.02.2010 WAS RECEIVED BY THE A SSESSEE ON 19.03.2010. THE ASSESSEE OUGHT TO HAVE FILED THE A PPEAL WITHIN 60 DAYS FROM THE RECEIPT OF THE ORDER OF THE CIT(A) I.E., O N OR BEFORE 18.05.2010. THE APPEAL HAS HOWEVER BEEN FILED BY THE ASSESSEE O NLY ON 26.03.2012. THERE IS A DELAY OF 678 DAYS IN FILING THE APPEAL B Y THE ASSESSEE BEFORE THE TRIBUNAL. 10. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDO NATION OF DELAY AND THE CONTENTIONS OF THE SAID APPLICATION HAVE BEEN V ERIFIED BY AN AFFIDAVIT OF AKASH RANKA, PARTNER OF THE ASSESSEE. IN THE APPLI CATION FOR CONDONATION OF DELAY, THE ASSESSEE HAS STATED THAT WHEN THE APP EAL OF THE REVENUE CAME UP FOR CONSIDERATION BEFORE THE HONBLE HIGH C OURT OF KARNATAKA, THE COUNSEL WHO APPEARED ON BEHALF OF THE ASSESSEE BEFO RE THE HONBLE KARNATAKA HIGH COURT, AFTER EXAMINING THE ORDER OF THE CIT(A), ADVISED THE ASSESSEE TO FILE AN APPEAL AGAINST THE ORDER OF THE CIT(APPEALS), WHEREBY THE CIT(A) HAD NOT ALLOWED DEDUCTION U/S. 80IB OF T HE ACT ON 16 FLATS, WHICH ACCORDING TO THE CIT(A), EXCEEDED THE BUILT-UP AREA OF 1500 SQ.FT. IT HAS FURTHER BEEN MENTIONED THAT ON RECEIVING SUCH ADVIC E, THE ASSESSEE FILED AN APPLICATION WITHIN 4 DAYS OF OBTAINING THE PROFE SSIONAL ADVICE. IT HAS FURTHER BEEN SUBMITTED THAT IF THIS APPLICATION FOR CONDONATION OF DELAY IN FILING THE APPEAL IS NOT ALLOWED, THE ASSESSEE WOUL D BE PUT TO GREAT ITA NO.425/BANG/2012 PAGE 10 OF 14 HARDSHIP AND IRREPARABLE INJURY AND ON THE OTHER HA ND NO HARDSHIP OR INJURY WOULD BE CAUSED TO THE RESPONDENT, IF THIS APPLICAT ION OF CONDONATION OF DELAY IS ALLOWED. RELIANCE WAS PLACED ON THE DECIS ION OF THE HONBLE APEX COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION V. MST. KATIJI & ORS. (1987) 167 ITR 471 AND ALSO IN THE CASE OF CONCORD OF INDIA INSURANCE CO. LTD. V. SMT. NIRMALA DEVI AND ORS. 11 8 ITR 507 . FURTHER THE ASSESSEE ALSO RELIED ON DECISIONS OF TH E HONBLE APEX COURT IN THE CASE OF RADHA KRISHNA RAI V. ALLAHABAD BANK & ORS. (2009) 9 SCC 733 AND COMMISSIONER OF INCOME-TAX V. WEST BENGAL INFRASTRUCTURE DEVELOPMENT FINANCE CORPORATION LTD. (2011) 334 ITR 269 (SC) . 11. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON MERITS, THE HONBLE HIGH COURT HAS ALREADY HELD THAT THE BALCON Y AREA WAS NOT EXCLUSIVE OF 16 FLATS AND WAS THE COMMON AREA AND T HEREFORE TO BE EXCLUDED IN COMPUTING THE 1500 SQ.FT. BUILT-UP AREA . HE THEREFORE SUBMITTED THAT ON MERITS, THE ASSESSEE CASE IS SQUARELY COVE RED BY THE DECISION OF THE HONBLE KARNATAKA HIGH COURT. WITH REGARD TO T HE DELAY, THE LD. COUNSEL REITERATED THE STAND OF THE ASSESSEE AS REFLECTED I N THE APPLICATION FOR CONDONATION OF DELAY. HE ALSO RELIED ON THE DECISI ON OF THE ITAT BANGALORE BENCH IN THE CASE OF SHAKUNTALA HEGDE, L/R OF R.K. HEGDE V. ACIT, ITA NO.2785/BANG/2004 FOR THE A.Y. 1993-94 , WHEREIN THE HONBLE TRIBUNAL CONDONED THE DELAY OF ABOUT 1331 D AYS IN FILING THE APPEAL. FURTHER REFERENCE WAS MADE TO THE DECISION OF THE HONBLE ITA NO.425/BANG/2012 PAGE 11 OF 14 KARNATAKA HIGH COURT IN THE CASE OF CIT V. ISRO SATELLITE CENTRE, ITA NO. 532/2008 DATED 28.10.2011 WHEREIN THE HONBLE COURT CONDONED THE DELAY OF FIVE YEARS. IN THE AFORESAID DECISION , THE HONBLE COURT FOUND THAT THE VERY LIABILITY OF THE ASSESSEE WAS NON-EXI STENT AND THEREFORE THE DELAY DESERVED TO BE CONDONED. 12. THE LD. DR FOR THE REVENUE, HOWEVER, OPPOSED TH E APPLICATION FOR CONDONATION OF DELAY. IT WAS SUBMITTED BY HIM THAT THE REASONS GIVEN IN THE APPLICATION FOR CONDONATION OF DELAY ARE NOT SUFFIC IENT TO CONDONE THE DELAY WHICH IS INORDINATE. 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT T HE OUTSET, WE OBSERVE THAT THE HONBLE SUPREME COURT, IN THE CASE OF MST. KATIJI (SUPRA), HAS EXPLAINED THE PRINCIPLES THAT NEED TO BE KEPT IN MIND WHILE CONSIDERING AN APPLICATION FOR CONDONATION OF DELAY . THE HONBLE APEX COURT HAS EMPHASIZED THAT SUBSTANTIAL JUSTICE SHOUL D PREVAIL OVER TECHNICAL CONSIDERATIONS. THE COURT HAS ALSO EXPLAINED THAT A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING THE APPEAL LATE. THE COURT H AS ALSO EXPLAINED THAT EVERY DAYS DELAY MUST BE EXPLAINED DOES NOT MEAN T HAT A PEDANTIC APPROACH SHOULD BE TAKEN. THE DOCTRINE MUST BE APP LIED IN A RATIONAL COMMON SENSE AND PRAGMATIC MANNER. IN THE CASE OF SHAKUNTALA HEGDE, L/R OF R.K. HEGDE V. ACIT, ITA NO.2785/BANG/ 2004 FOR THE A.Y. 1993-94 , THE HONBLE TRIBUNAL CONDONED THE DELAY OF ABOUT 1331 DAYS IN FILING THE APPEAL WHEREIN THE PLEA OF DELAY IN FILING APPEAL DUE TO ADVICE GIVEN BY A NEW COUNSEL WAS ACCEPTED AS SU FFICIENT. THE HONBLE ITA NO.425/BANG/2012 PAGE 12 OF 14 KARNATAKA HIGH COURT IN THE CASE OF CIT V. ISRO SATELLITE CENTRE, ITA NO. 532/2008 DATED 28.10.2011 HAS CONDONED THE DELAY OF FIVE YEARS IN FILING APPEAL BEFORE THEM WHICH WAS EXPLAINED DU E TO DELAY IN GETTING LEGAL ADVICE FROM ITS LEGAL ADVISORS AND GETTING AP PROVAL FROM DEPARTMENT OF SCIENCE AND PMO. IN THE AFORESAID DECISION, THE HONBLE COURT FOUND THAT THE VERY LIABILITY OF THE ASSESSEE WAS NON-EXI STENT AND THEREFORE CONDONED THE DELAY IN FILING APPEAL. 14. KEEPING IN MIND THE AFORESAID PRINCIPLES, WE SH ALL CONSIDER THE CLAIM OF THE ASSESSEE IN THE PRESENT CASE. ADMITTEDLY TH E ADVICE WAS GIVEN BY THE COUNSEL WHO APPEARED ON BEHALF OF THE ASSESSEE BEFORE THE HONBLE HIGH COURT. THE DECISION OF THE HONBLE HIGH COURT WAS RENDERED ON 28.2.2012. THE APPEAL HAS BEEN FILED BY THE ASSESS EE BEFORE THE TRIBUNAL ON 26.3.2012. HENCE, WE FIND THAT THERE HAS BEEN N O WILLFUL NEGLECT ON THE PART OF THE ASSESSEE. IN SUCH MATTERS THE ADVICE O F THE PROFESSIONAL WOULD BE THE POINT OF TIME AT WHICH THE ASSESSEE WOULD BE GIN TO EXPLORE THE OPTION OF EXHAUSTING ALL LEGAL REMEDIES. WE ARE AL SO OF THE VIEW THAT BY CONDONATION OF DELAY THERE IS NO LOSS TO THE REVENU E AS LEGITIMATE TAXES PAYABLE IN ACCORDANCE WITH LAW ALONE WOULD BE COLLE CTED. WE THEREFORE ACCEPT THE REASON GIVEN FOR CONDONATION OF DELAY IN FILING THE APPEAL. THE DELAY IN FILING THE APPEAL IS ACCORDINGLY CONDONED. 15. AS FAR AS THE MERITS OF THE APPEAL ARE CONCERNE D, WE FIND THAT THE HONBLE HIGH COURT HAS ALREADY ACCEPTED THE PLEA OF THE ASSESSEE THAT THE BALCONY AREAS, WHICH WERE ADDED AS FORMING PART OF THE BUILT OF AREA OF THE 16 FLATS WHICH WERE CONSIDERED AS EXCEEDING THE BUI LT UP AREA OF 1500 ITA NO.425/BANG/2012 PAGE 13 OF 14 SQ.FT., WERE COMMON AREAS AND HAD TO BE EXCLUDED WH ILE MEASURING THE BUILT UP AREA. THERE WAS COVERED BALCONY AREA IN T HE 16 FLATS AND SUCH COVERED BALCONY COULD BE USED BY TWO ADJOINING FLAT S AND WAS COMMON BETWEEN THEM. THE DVO IN MEASURING THE AREA OF THE SE FLATS DIVIDED THE COVERED BALCONY AREA AND APPORTIONED THEM BETWEEN T HE TWO FLATS. THE DEFINITION OF BUILT UP AREA FOR THE PURPOSE OF SEC. 80-IB(10) OF THE ACT EXCLUDES AREA WHICH ARE MEANT FOR COMMON USE. THE FACT THAT IT WAS NOT COMMON AREA FOR ALL THE FLATS IN THE BUILDING CANNO T BE THE BASIS TO APPORTION THE AREA OF COVERED BALCONY IN MEASURING THE AREA OF THE TWO ADJOINING FLATS TO WHICH THE COVERED BALCONY WAS CO MMON. THE DEFINITION OF THE BUILT UP AREA IN THE PROVISIONS OF SEC.80-IB(1) DOES NOT SPEAK OF COMMON AREA FOR ALL FLATS IN A HOUSING PROJECT. TH EREFORE THE ASSESSEE SHOULD GET THE BENEFIT OF THE PROVISIONS OF SEC.80I B(10) WHICH ARE EXEMPTION PROVISIONS. IN VIEW OF THE ABOVE, WE HOL D THAT THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION U/S.80-IB(10) OF THE ACT ON THE PROFITS OF THE 16 FLATS WHICH WERE EXCLUDED BY THE CIT(A) IN THE I MPUGNED ORDER. WE HOLD ACCORDINGLY. 16. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS AL LOWED. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF DECEMBER 2012. SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 14 TH DECEMBER , 2012. DS/- ITA NO.425/BANG/2012 PAGE 14 OF 14 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.