Telangana High Court
Modi Shelters, Hyd vs Deputy Commissioner Of Income Tax, Hyd on 21 May, 2025
Author: P.Sam Koshy
Bench: P.Sam Koshy
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PSK, J & NNR, J
IN THE HIGH COURT FOR THE STATE OF TELANGANA:
HYDERABAD
***
Income Tax Tribunal Appeal No.167 of 2012;
Income Tax Tribunal Appeal No.229 of 2016;
and
Income Tax Tribunal Appeal No.230 of 2016
Between:
M/s. Modi Builders & Realtors (P) Ltd.
and Others.
Appellants
VERSUS
Asst. Commissioner of Income Tax
Circle-16 (2), Hyderabad, and Others.
Respondents
COMMON JUDGMENT PRONOUNCED ON: 21.05.2025
THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
1. Whether Reporters of Local newspapers
may be allowed to see the Judgments? : Yes
2. Whether the copies of judgment may be
marked to Law Reporters/Journals? : Yes
3. Whether His Lordship wishes to
see the fair copy of the Judgment? : Yes
__________________
P.SAM KOSHY, J
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PSK, J & NNR, J
* THE HON'BLE SRI JUSTICE P.SAM KOSHY
AND
THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
+ Income Tax Tribunal Appeal No.167 of 2012;
Income Tax Tribunal Appeal No.229 of 2016;
and
Income Tax Tribunal Appeal No.230 of 2016
% 21.05.2025
# Between:
M/s. Modi Builders & Realtors (P) Ltd.
and Others. Appellants
VERSUS
Asst. Commissioner of Income Tax
Circle-16 (2), Hyderabad, and Others.
Respondents
! Counsel for Appellants(s) : Mr. S. Ravi, learned Senior Counsel
appearing on behalf of Mr. C.H.
Pushyam Kiran.
^Counsel for the Respondent(s) : Mr. J.V. Prasad, learned Senior
Standing Counsel for the Income
Tax Department.
<GIST:
> HEAD NOTE:
? Cases referred
1. 2016 SCC Onlilne Guj 4685
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PSK, J & NNR, J
THE HONOURABLE SRI JUSTICE P.SAM KOSHY
AND
THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA
Income Tax Tribunal Appeal No.167 of 2012;
Income Tax Tribunal Appeal No.229 of 2016;
and
Income Tax Tribunal Appeal No.230 of 2016
COMMON JUDGMENT:
(per the Hon’ble Sri Justice P.SAM KOSHY)
Since the issue arising in the instant batch of appeals is one and
the same, we proceed to decide the instant appeals by way of this
common judgment.
2. I.T.T.A.No.167 of 2012 is filed by the appellant herein under
Section 260-A of the Income Tax Act, 1961 assailing the order passed
by the Income Tax Appellate Tribunal, Hyderabad “A” Bench in
I.T.A.No.1458/Hyd/2011 for the Assessment Year 2008-09, dated
22.03.2012 (for short, ‘the impugned order’); I.T.T.A.No.229 of 2016 is
filed by the appellant under Section 260-A of the Income Tax Act,
1961 assailing the order passed by the Income Tax Appellate Tribunal,
Hyderabad “A” Bench in I.T.A.No.1565/Hyd/2013 for the Assessment
Year 2009-10, dated 29.01.2016 (for short, ‘the impugned order’); and
I.T.T.A.No.230 of 2016 is filed by the appellant under Section 260-A of
the Income Tax Act, 1961 assailing the order passed by the Income
Tax Appellate Tribunal, Hyderabad “A” Bench in
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PSK, J & NNR, J
I.T.A.No.1566/Hyd/2013 for the Assessment Year 2009-10, dated
29.01.2016 (for short, ‘the impugned order’).
3. Heard Mr. S. Ravi, learned Senior Counsel appearing on behalf
of Mr. C.H. Pushyam Kiran, learned counsel for the appellant, in all
the appeals; and Mr. J.V. Prasad, learned Senior Standing Counsel for
the Income Tax Department, for the sole respondent, in all the
appeals.
4. For convenience, the facts in I.T.T.A.No.229 of 2016 are
discussed hereunder.
5. The appellant herein is a real estate developer, (for short, ‘the
assessee’). The assessee is engaged in the business of construction of
residential units / bungalows which are duplexes surrounded by a
compound wall. Each residential unit consists of a portico and an
open terrace. In the course of business, the assessee filed its return of
income for the Assessment Year 2009-10 on 21.09.2009 admitting an
income of Rs.3,16,46,847/- and claimed the entire amount as
deduction under Section 80-IB (10) showing taxable income at Rs.NIL.
The same was processed under Section 143(1) of the Income Tax Act,
1961 on 30.03.2011. After scrutiny, the respondent had issued a
notice under Section 143(2) of the Act.
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PSK, J & NNR, J
6. After assessment, the respondent determined the total income of
the assessee at Rs.3,41,41,862/- by making disallowances on two
grounds, viz., disallowance of deduction under Section 80-IB (10) for a
sum of Rs.3,16,46,847/- and disallowance under Section 14A for a
sum of Rs.24,95,015/-. However, vide the impugned order the
Tribunal rejected the claim of the assessee pertaining to deduction
under Section 80-IB of the Income Tax Act, 1961 (for short, ‘the Act’)
amounting to Rs.3,16,46,847/- on the ground that the terrace which
is open to sky and portico without walls can be included in computing
the built-up area of each residential unit were exceeding 1,500 sq.ft.
for the purposes of determining eligibility for deduction under Section
80-IB of the Act.
7. Assailing the same, the assessee preferred the instant appeal.
8. The question of law which has cropped up for consideration in
the instant appeal is : “Whether the terrace / balcony that is in the form
of open to sky or portico / porch area without walls could be added
while computing the built-up area for the purpose of determining the
eligibility for deduction under Section 80-IB of the Income Tax Act,
1961?”
9. As per Section 80-IB of the Act an assessee is entitled for
deduction in respect of profit and gain from certain industrial
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undertakings and other infrastructural undertakings. Such
deductions shall not apply to housing projects carried out in
accordance with the scheme framed by the Central Government or the
State Government in the course of re-construction or re-development
of existing buildings in areas declared to be slum area. Such benefits
shall not be however be applicable to residential units with a built-up
area of less than 1,500 sq.ft., in case if the residential units are
outside the metropolitan city of Delhi or Bombay.
10. For proper understanding of the issue involved, it is also
necessary to refer to the definition of the “width of area” as is
envisaged in Clause (14)(a) of Section 80-IB of the Act, which for ready
reference is being reproduced as under, viz., :
“(14) For the purposes of this section —
(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.”
11. A plain reading of above Clause (14)(a) of Section 80-IB would
clearly indicate that the built-up area would include the entire inner
measurement of a residential unit on the floor level added by
thickness of a wall and includes projections and balconies. However,
common areas shared with other residential units are excluded from
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the same. This, in other words, would mean that to be a part of built-
up area, the same must be part of the inner measurements of a
residential unit and it would exclude the open terrace space and
would also exclude a balcony which is shared by more than one
residential owner. The area of dispute in the instant appeal so far as
the appellants are concerned is the portico for parking of cars in the
ground floor and also in the open terrace space on the first floor
exclusively to be used by the owner himself and is not one which is to
be shared by the others. The Tribunal, in the instant case, has gone
into to decide the appeal of the assessee based upon an order passed
by the Tribunal in the case of the appellants themselves for the
previous Assessment Year 2007-08. However, the Tribunal seems to
have ignored the definition of the built-up area as defined under
Clause (14)(a) of Section 80-IB of the Act. What is necessary at this
juncture to the take note of the fact is that the as per the definition of
“built-up” area, it means only inner measurement of a residential unit.
This, in other words, would mean that anything which is not within
the inner measurement area of the residential unit would
automatically get excluded from the computation of built-up area.
What is further included in the definition of “built-up” area is that
area of the inner measurement even if it be the projection from a room
or a balcony, increased by thickness of a wall, then what is also
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necessary to be construed is that there is a vast difference between a
projection or a balcony with that of an open terrace. Likewise, there is
also a clear definition between the area which otherwise falls within
the inner measurement of a residential unit when it is compared to a
portico meant for parking of cars by the residential unit, an area
which is outside the inner measurement and an area which is totally
exposed to the open and is not surrounded by the thickness of its
wall. A portico can neither be brought within the ambit of a
projection, nor can it be termed as “parking”. In the same manner, an
open terrace is also quite different than that of an otherwise closed
balcony or projection and it was in this context that the law-makers
while redefining the term built-up area had only included those areas
which could be easily brought within the inner measurement of the
residential unit and which included a balcony area of projection, and
the term “open terrace” or an “open space” have all been deliberately
left out from the said definition.
12. In this context, it would be relevant to take note of the decision
rendered by a Division Bench of the High Court of Gujarat in the case
of Commissioner of Income Tax vs. Amaltas Associates 1 wherein
the Division Bench at paragraph Nos.3 and 8 had discussed the term
“built-up” area in its proper perspective, as has been discussed in the
1 2016 SCC Onlilne Guj 4685
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PSK, J & NNR, J
preceding paragraph. For ready reference, paragraph Nos.3 and 8 of
the said decision are extracted hereunder, viz.,
“3. The Tribunal, allowed the assessee’s appeal by the impugned
judgment and held that the assessee was a developer. The assessee had
undertaken full responsibility of constructing the residential units and had
also been responsible for the resultant profit or loss arising out of such
venture. The assessee thus, had undertaken full risk. Regarding the
Revenue’s contention regarding excess built-up area, the Tribunal held that
the open space attached to a penthouse, cannot be included in the term
“balcony”. The Tribunal was of the view that the case of the present
assessee was same as the cases of Radhe Developers and Shakti
Corporation, two sets of appeals, where the Tribunal had allowed the
deduction under Section 80-IB(10) of the Act.
… … …
8. Section 80-IB(14) of the Act contains definitions for the purpose of
the said section. Clause (a) thereof provides that 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.
Thus, the built-up area would include inner measurements of a residential
unit on the floor level added by thickness of a wall as also projections and
balconies. This would however, exclude the common areas shared with
other residential units. This exclusion clause of the common areas shared
by other units cannot be applied in the reverse. In other words, the
moment a certain area is not shared but is exclusively assigned for the use
of a particular residential unit holder, would not mean that such area
would automatically be included in the built-up area. In order to be part of
the built-up area, the same must be part of the inner measurements of a
residential unit or projection or balcony. The open terrace space on the top
floor of a building would not satisfy this description. It will also not be
covered in the expression balcony. Term “balcony” has been explained in
Webster’s Third International Dictionary (Unabridged) as unroofed platform
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projecting from the wall of a building, enclosed by a parapet or railing, and
usually resting on brackets or consoles. It is often used as synonyms to
gallery, loggia, veranda, piazza, porch, portico, stoop, etc. In the context of
residential or even commercial complexes, term “balcony” has gained a
definite common parlance meaning. It usually consists of a projection from
a building covered by a parapet or railing and may nor may not but
usually is covered from the top. This term “balcony” certainly would not
include an open terrace adjoining a bedroom or any other constructed area
of a penthouse. The terrace is not a projection.”
13. From the given facts and circumstances if we take the literal
meaning of “built-up” area as is defined Clause (14)(a) of Section 80-IB
of the Act, a built-up area includes balcony and projection. If on the
inclusion of balcony and projections, if any, and if the total built-up
area exceeds 1,500 sq.ft., the assessee would not be entitled for
deduction Section 80-IB of the Act. Another fact which needs to be
appreciated is that perusal of the impugned order passed by the
Assessing Officer so also by the Appellate authority and the Tribunal,
the factual matrix of the case does not seem to have been discussed as
to whether the area which the assessee intends to get excluded from
the built-up area is one which can be brought within the purview of an
inner measurement of a residential unit or not. Admittedly, in the
case of the assessee, if it is only a projection or a balcony there can be
no doubt that under the definition of “built-up” area, projections and
balconies are also included and by no stretch of imagination those can
be excluded from computation of built-up area.
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14. Nonetheless, from the drawing of the construction which is
available along with the Assessment Order which is marked as
Annexure-I, the portion which is being sought to be excluded is an
open terrace and a portico. Both “open terrace” and an “open portico”
has nowhere been mentioned to be a part of the built-up area. In the
said circumstances, relying upon the decision of the High Court of
Gujarat in the case of Amaltas Associates (1 supra), a balcony
certainly would not be excluded treating it as “open terrace”. So also,
an open terrace can never be termed to be a balcony or a projection.
Likewise, an open portico in front of the residential unit which is
otherwise on the outside part of the residential unit also cannot be
brought within the purview of an inner measurement of a residential
unit.
15. Now what is to be seen is whether excluding the open terrace
and the area of the portico, and whether the built-up is exceeding
1,500 sq.ft. or not (if it still exceeds 1,500 sq.ft.), the assessee would
not be entitled for the benefit as is otherwise enshrined under Section
80-IB of the Act. However, if the built-up area falls within the 1,500
sq.ft. excluding the open space in the portico area, the appellants are
entitled for the benefit under Section 80-IB of the Act.
16. From the Annexure-I attached to the assessment order, which is
a drawing of the construction area and which is sought to be excluded
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is an open terrace and a portico, and for the reasons stated above, an
open terrace and a portico cannot be brought within the ambit of the
definition of an “built-up” area as is defined under Section 80-IB
(14)(a) of the Act, the definition that was inserted vide amendment that
took place w.e.f. 01.04.2005. Moreover, from the drawing itself, it is
evidently clear that the two spaces i.e. the open terrace and also the
portico is an area which is otherwise totally open and exposed. It could
not be under any stretch of imagination be brought or considered to
be an area within the inner measurement of a residential unit. Since it
is an open space which cannot be brought within the purview of inner
measurement of the residential unit, the said two areas i.e. the open
terrace and the portico has to be excluded from computation of the
built-up area entitling the appellant the benefit that which is
enshrined under Section 80-IB of the Act.
17. For all the aforesaid reasons, we are in unanimity in the course
of endorsing the view expressed by the Division Bench in the case of
Amaltas Associates (1 supra). Therefore, the instant appeal filed by
the assessee to the aforesaid extent stands allowed. The impugned
order passed by the Tribunal as well as the impugned assessment
order passed by the Appellate Authority deserve to be and are
accordingly set aside. As a consequence, the I.T.T.A.No.167 of 2012
and I.T.T.A.No.230 of 2016 also stand allowed. No costs.
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18. As a sequel, miscellaneous petitions, pending if any in these
appeals, shall stand closed.
__________________
P.SAM KOSHY, J
_______________________________
NARSING RAO NANDIKONDA, J
Date: 21.05.2025
Note: L.R. Copy to be Marked.
(B/o) Ndr