M/S. Modi Builders & Realtors (P) Ltd., Secunderabad v. Asst. Cit Circle 16(2) Hyderabad .

Chandra Poojari, Accountant Member. - This appeal of the assessee is directed against the order of the CIT(A)-V, Hyderabad dated 21-10-2010 for the assessment year 2007-08.

2. The grievance of the assessee in this appeal is with regard to denial of deduction under section 80-IB in respect of Sunshine project and Greenwoods project.

3. Further though the assessee raised ground No. 4 in his appeal that the CIT(A) failed to admit the additional ground on merit and failed to appreciate that gross income was brought to tax without netting off of the corresponding expenditure. This ground is not pressed before us and the same is dismissed as not pressed.

4. Brief facts of the issue in dispute are that the assessee is a real estate developer and there is only one issue in appeal that relates to the withdrawal of deduction under section 80-IB of the Income-tax Act. For assessment year 2007-08 the assessee claimed deduction of Rs. 1,75,08,544 under section 80-IB with respect to the following three housing projects :

(a)Gardenia Project

(b)Sunshine Project

(c)Greenwoods Project

5. The assessee company claimed the above projects to be eligible for deduction under section 80-IB(10) and therefore, included an amount of Rs. 83,76,681 as the estimated profit at the rate of 20 per cent on advances and instalments received from customers and claimed this amount as deduction under section 80-IB. The Assessing Officer noticed during the assessment proceedings that for profits to become eligible for deduction under section 80-IB, it must fulfil the conditions specified in that section and one of the important condition is that the residential unit should have a maximum built up area of 1500 sq. ft. at places other than Delhi or Mumbai and less than 1000 sq. ft. if the project is situated within 25 km from the municipal limits of these cities.

6. According to the Assessing Officer the area of each flat of the projects Sunshine and Greenwoods exceeded 1500 sq. ft. Accordingly deduction under section 80-IB in respect of these projects was disallowed. The assessee made a contention before the lower authorities that portico and open terrace attached to each flat are to be excluded from built-up area. The argument of the assessee was not accepted by the lower authorities. Aggrieved, the assessee is in appeal before us.

7. The learned counsel for the assessee submitted before us that built-up area in a house is absolute and not subject to interpretation by anyone. According to him ‘built-up area’ is an area covered by the building above the plinth level enclosed with a wall all around with doors, windows and roof and used for habitation purpose. According to him portico and open terrace/balcony are not used for habitation purpose and it cannot be part of built-up area. Balcony or projection is not covered by slab. It is just the roof of the floor below. The portico or parking area is not habitable and used for parking purposes and it cannot be part of built-up area. He drew our attention to the meaning of built-up area as mentioned in municipal bye-laws, national building code and Indian Standard Code (page 72). The learned counsel for the assessee submitted that computation of built-up area is in accordance with the above norms. He filed a photocopy of building plan and photos of each flat as well those are available on record. He drew our attention to the provisions of section 80-IB(14)(a ) of the Income-tax Act, 1961 which read as follows :

"80-IB(14)(a) - "built-up area" means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units;"

8. According to him as per building plan as well as from the certificate of chartered engineer, the calculation of built-up area of each flat is less than 1500 sq. ft. and in conformity with section 80-IB(10)(c) of the Act and the assessee is entitled for deduction under section 80-IB. Further he filed a copy of sale deed executed for the sale of the building wherein the built-up area is mentioned including portico and terrace which is less than 1500 sq. ft. and the area which was not sold as built-up area cannot be considered as built-up area for the purposes of income-tax. He submitted that "residential unit" has not been defined under the Income-tax Act. It is, therefore, to be understood in a sense, which is common understood. He drew our attention to the meaning of built-up area in the Webster Dictionary.

9. He submitted that the definition of built-up area under section 80-IB(14)(a) does not provide that land or flat area is also to be included in the measurement of built-up area. In a multi-storeyed apartment flat is sold along with a proportionate share of land but such share of land is not taken into consideration while computing the built-up area of the flat. Similarly, the land on which the bungalow is constructed cannot be taken as part of built-up area. The buildings are constructed on a land and for this purpose land always remains as appurtenant but cannot be considered as built-up area. Built-up area is nothing but constructed area. The entire area appurtenant to the building with a compound wall cannot, therefore, constitute as built-up area. Further he submitted that in a multi-storeyed building the terrace is in top floor which is open to sky and is not habitable. The terrace area cannot form part of the residential unit. Similarly, open terrace provided for a bungalow cannot form part of the residential unit. He submitted that this can also be understood by way of example of penthouse. Penthouse is on a terrace covering certain portion of terrace. While computing built-up area of the penthouse, the open terrace area surrounding the penthouse is not measured. On the same logic portico and open terrace are to be excluded while computing built-up area of the building. According to him built-up area does not include parking area as it is not part of the usable built-up area. Similar is the position in municipal laws and other standards and codes. In view of this, he submitted that portico and balcony cannot form part of residential unit and as such the assessee rightly excluded the portico and open terrace.

10. The learned DR relied on the order of the CIT(A).

11. We have heard both the parties and also perused the material available on record. The main contention herein is with regard to inclusion of portico and balcony for the purpose of determining the built-up area as per clause (a) of sub-section (14) of section 80-IB of the Income-tax Act, 1961. As per this clause the definition of built-up area is as follows :

"80-IB(14)(a) – "built-up area" means the inner measurements of the residential unit at the floor level, including the projections and balconies, as increased by the thickness of the walls but does not include the common areas shared with other residential units;"

12. The above definition was introduced by Finance (No. 2) Act, 2004. This amendment starts with "inner measurement of residential unit". Even as per common parlance built-up area is the carpet area covered by thickness of wall + balcony + portico (projection). Thus, whether it is the inner measurement or outer measurement one thing is amply clear that, it should be actual measurement not any estimate. The dispute herein is with regard inclusion of portico and balcony for measuring the built-up area of each residential unit. If the portico and balcony area is added, the built-up area would exceed 1500 sq. ft. per unit. As per the definition as stated in section 80-IB(14)(a) built-up area includes projection and balcony. Accepted rules of interpretation for and inclusive definition as elucidated by the Hon’ble Supreme Court in the case of CIT v. Tajmahal Hotel AIR 1972 SC 168 is that if the word "include" is used in an interpretative clause, it must be construed as apprehending not only such as it signifies to its nature and merit, but also things which the interpretative clause declares what they shall include. So normal meaning of built-up area, but for the definition include projection and balcony, would definitely exclude the later. Therefore, there can be no doubt that prior to the introduction of the definition aforesaid clause built-up area would not include projections and balcony as normally understood. However, after the enactment itself clearly specifies that built-up area includes both projections and balconies as increased by the thickness of walls and does not include common area shared with others. This definition gives the enlarged meaning of built-up area which includes balcony and projection. After inclusion of balcony and projection if the total area of built-up area exceeds 1500 sq, ft. in this case the assessee is not entitled for deduction under section 80-IB of the Act. The learned counsel for the assessee placed reliance on the judgment of Supreme Court in the case of Bajaj Tempo Ltd. v. Commissioner Of Income-Tax. [1992] 196 ITR 188 / 62 Taxman 480 wherein it was held that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it. In our opinion this case law has no application to the facts of the assessee’s case. The argument of the learned counsel for the assessee is good in part but the inference does not logically follow. In our opinion, the legislative expedience adopted to achieve that objective in the provision requires to be given effect on it is own language. There is no ambiguity in clause (a) of sub-section (14) of section 80-IB of the Act. As there is no ambiguity in the statutory language, resort to interpretation process to unfold the legislative intent becomes impermissible. The supposed intention of the legislature cannot then be appealed to whittle down statutory language which is otherwise unambiguous. If the intendment is not in the words used, it is nowhere else. The need for interpretation arises when the words used in the statute are on their own terms ambivalent and do not manifest the intention of the legislature. The words in the statute must, prima facie, be given their ordinary meanings. Where the grammatical construction is clear, manifest and without doubt, that construction ought to prevail unless there are some strong and obvious reasons to the contrary. It has to be reiterated that the object of interpretation of a statute is to discover the intention of Parliament as expressed in the Act. The dominant purpose in construing a statute is to ascertain the intention of the Legislature as expressed in the statute, considering it as a whole and in its context. That intention, and, therefore, the meaning of the statute, is primarily to be sought in the words used in the statute itself, which must, if they are plain and unambiguous, be applied as they stand.

13. Being so, we cannot adopt meaning as contended by the learned counsel for the assessee. In our opinion, built-up area includes portico and balcony also and in this case it exceeds 1500 sq. ft. per residential unit. Accordingly the assessee is disentitled for the benefit under section 80-IB of the Act. The order of the CIT(A) is upheld on this issue.

14. In the result, the appeal of the assessee is dismissed.