The High Court · 2025

M/s Modi Builders & Realtors (P) Ltd., A company incorporated under the i;;;;;;.];t,-rbso, ni'riisits'i6g[ieied orrice'atks'q-t1trt & 4, 3'd Floor, 5ohJ, Uin..n. M G. Roa-d, Sec-underabad. Represented by its Managing Director Mr. Sourabh Modi, R/o Hyderabad. ...APPELLANT AND Asst. Commissioner of lncome tax, Circle -16 (2)' Aayakar Bhavan, Basheerbagh, HYderabad - 4. ...RESPONDENT (Cause file amended as per C'O. dt: 19/10/150 in ITTA MP 101/16) l.A. NO: 1 OF 2016 (ITTAMP. NO: 74 OF 2016) Petition under section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High court may be pleased to pass an order staying the collection of the disputed demand of Rs.48,58,3221 in the appeal for the assessment year 2009-10. Counsel for the Appellant: Mr. S. Ravi, learned Senior Counsel appearing on behalf of Mr' Ch. Pushyam Kiran Counsel for the Respondent: Mr. J.V. Prasad (SC FOR INCOME TAX OEPARTMENT} lTTA.No.230 of 2016 Appeal under section 260-A of the lncome Tax' Act, 1961 against the order OateO Zb-Ot-201G in t.T.A.No.1566/Hyd/2013 for the Assessment Year 2009-10 on the file of the lncome Tax Appellate Tribunal, Hyderabad "A" Bench' Hyderabad. Between: M/s. Modi Shelters (P) Ltd, A Company incorporated under the- Companies Act, ' 54-18713 & 4 Floor' Soham Mansion' 1956, having its registered office at M.G.Road, Stcundeiabad. Represented by its Managing Director, Sourabh Modi, R/o. Hyderabad. ...APPELLANT/Appellant AND The Assistant Commissioner of lncome Tax, Circle -16(2), Aayakar Bhavan, Basheedragh, Hyderabad. Cause Title amended as per Court order dated 19-10-2016 in ITTA MP.No,104 of 2016 ..RESPON DENT/Respondent l.A. NO: 1 OF 2016(ITTAMP. NO: 75 OF 2016) Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to pass an order staying the collection of the disputed demand of Rs. 46,82,296/- in the appeal for the assessment year 2009-10. l.A. NO: 2 OF 2016(lTfAMP. NO: 104 OF 2016) Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased pass an order permitting the cause title of ITTA No.230 of 20'16 to be amended by replacing the name of respondent i.e. 'Assistant Commissioner of lncome Tax, Ward 16(2), Hyderabad' with 'The Assistant Commissioner of lncome Tax, Circle- 16(2), Aayakar Bhavan, Basheerbagh, Hyderabad-4. Counsel for the Appellant: Mr. S. Ravi, Iearned Senior Counsel appearing on behalf of Mr. Ch. Pushyam Kiran Counsel for the Respondent: Mr. J.V. Prasad (SC FOR INCOME TAX DEPARTMENT} The Court delivered the following: COMMON JUDGMENT PSKJ&NNR,J THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE NARSING RAO NANDIKONDA Income Tax Tribunal Appeal No.167 of 20L2; Income Tax Tribunal Appeal No.229 of 2OL6z Income Tax Tribuna I Appeal No.23O of 2OL6 COMMON JUDGMENT: (per the Hon'bte Sri Justice P.SAM KOSIrY) since the issue arising in the instant batch of appeals is one a,d the same, we proceed to decide the instant appeals by way of this common judgment.

2. I.T.T.A.No. 167 of 2Ol2 is Iiled by the appellant herein under Section 260-4 of the lncome Tax Act, 1961 assailing the order passed by the Income Tax Appellate Tribunal, Hyderabad ,,A,, Bench in LT.A.No.1458/Hyd/2011 for the Assessment year 20Og_O9, dated 22.03.2012 (for short, lhe impugned order); I.T.T.A.No.229 of 2Ol6 is filed by the appellant under section 260-A of the Income Tax Act, 196 I assailing the order passed by the Income Tax Appellate Tribunal, Hyderabad "A" Bench in I.T.A.No.rs6s/Hyd/2013 for the Assessment Year 2009-10, dated 29.O1.2016 (for short, .the impugned order,); and I.T.T'A.No.23o of 2016 is filed by the appellant under Section 260-4 of the Income Tax Act, 1961 assailing the order passed by the Income Tax Appellate Tribunal, Hyderabad Bench in PSKJ &NNR,J \ 2009-10, dated I.T.A.No.1566/Hydl2Ol3 for the Assessment Year 29.OL.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 a-re discussed hereunder' 5. The appellant herein is a rea-l 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 2OO9-10 on 2l 'O9 '2OO9 admitting an income of Rs.3,16,4 6,847 l- and claimed the entire amount as deduction under Section go-IB (10) showing taxable income at Rs'NIL. ThesamewasprocessedunderSection143(1)ofthelncomeTaxAct, 1961 on 30.03.2011' After scrutiny' the respondent had issued a notice under Section A3(2\ of the Act' PSK,J & NNR,J

6. Alter 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 g0-lB (10) for a sum of Rs.3,16,46,847 / and disallowance under Section 14A for a sum of Rs.24,95,015/-. However, uide the impugned order the Tribunal rejected the claim of the assessee pertaining to deduction under Section 8O-lB of the Income Tax Act, 1961 (for short, the ActJ 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 residentia_l unit were exceeding 1,SOO sq.ft. for the purposes of determining eligibility for deduction under Section 80-lB 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 th.e tenace / balcong that is in the form of open to skg or portico / porch area without rtalls could be ad.d.ed tuhile computtng the built-up area for the purpose of determining the eligibility for deduction under Section 8O-IB of the Income Tax Act, 1961?"

9. As per Section BO-IB of the Act an assessee is entitled for respect of profit and gain from certain industrial deduction ln 1 PSK, J & NNR, J 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 aleas declared to be slum area' Such benehts sha]lnotbehoweverbeapplicabletoresidentialunitswithabuilt-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 (la)(a) of Section 80-IB of the Act' which for ready reference is being reproduced as under, viz', : "(14) For tte purposes of this section - (a) "buitt-up areo" means the inner meosurements of the residentiat unit at the floor leuel inclui'ding the projections and balconies, as increased by the thickness of the utalls but does not include the common areas shared uith other residential units "

11. A plain reading of above Clause (la)(a) of Section 80-lB 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' commonareassharedwithotherresidentialunitsareexcludedfrom PSK, J & NNR, J 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 ald also in the open terrace space on the f,rrst 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 Tribunai 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 (la)(a) of Section B0-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 residentia-l 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 I-\ \r '---1 Pate 8 of 13 PSK,J & NNR,J 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 porticci meartt for parking of cars by the residenLial 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 ma-nner, arl 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. L2. 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 Associatesr 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 ' 2016 SCC Onlilnc Guj 4685 PSK,J & NNR, J preceding paragraph. For ready reference, ParagraPh Nos.3 and 8 of the said decision are extracted hereunder, viz., '3. The Tibuna[ allouted the assessee's appeal by the impugned judgment ond held that the ossessee utas a deueloper. The assessee had undertaken full responsibility of constructtng the residential units and had also been responsibte for the resultant proftt or loss artsing out of such uenture. ?he assessee thus, had undertaken fulL ri.sk. Regarding the Reuenue's contention regarding excess buttt-up area, the Tibunat hetd that the open space attached to a penthouse, cannot be included in the term "balcong'. The Tnbunal u.tas of the uieut that the case of the present assessee was same as the cases of Radhe Deuelopers and Shakti Corporation, tu)o sets of appeoLs, u.there the Tibunal had allou-ted the deduction under Section 80-IB(10) of the Act.

8. Section 80-lB(14) of the Act contains deftnitions for the purpose of the said section. Clause (a) thereof prouides that built-up areo means the lnner measurements of the restderLtiaL unit at the Jloor leuel, including the projections and balconies, as increased. bg the thickness of the ualls, but does not include the common areas shared u.tith other residentiol units- Thus, tle buitt-up area uould include inner measurements of a residential untt on the floor leuel added bg thickness of a utall as also projections and balconies. This would hou.teuer, exclude the common areas shared tuith other residential units. Thb exclusion clause of the common areas shared bg other units cannot be opplied in the reuerse. In other uords, tLe nroment a certain area is not sltared but is exclusiuelg asstgned for the use of a particular res[dentiaL untt lTolder, would not mean that such area uould automotically be lncluded in the built-up orea. In order to be part of the buitt-up area, the same must be part of the inner measurements of a residential unit or projection or balcony. The open terace space onthe top floor of a building woutd not satisfg this desciption. It will also not be couered in the expression bolcong. Tenn "balcong" has been explained in Webster's Third Intemational Dictionary (Unabridged) os unroofecl platform \ ^- 1 PSK,J & NNR,J - projecting from the u-tall of a building, enclosed by a parapet or railing, and usuallg resting on brackets or consoles. It is ofien used os sgnonAnls to gallery, loggia, ueranda, piazzo, porch, portico, stoop, etc. In the context of resiaential or euen ammercial compLexes, tenn 'balcong" has gained a defnite common parlance meaning. It usually consl3ts of a projection from a building couered by a parapet or railing ond mag nor maA not but usually is couered from the top. This tenn "balcong' certainlA uould not include an open tenace adjoining a bedroom or ang other constructed area of a penthouse. The tenace is not a projection."

13. From the given facts arrd circumstances if we take the literal meaning of "built-up" a-rea as is defined Clause (la)(a) of Section 80-lB 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 I ,500 sq.ft., the assessee would not be entitled for deduction Section 8O-IB of the Act. Another fact which needs to be appreciated is that perusal of the impugned order passed by the Assessing Ofhcer so also by the Appellate authority ard 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. PSIIJ & NNR,J

14. Nonetheless, from the drawing of the construction which is available along u,ith 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 circumstarces, relying upon the decision of the High Court of Gujarat in the case of Amaltas Associates ( 1 supra), a ba-lcony 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 lront of the residential unit which rs otherwise on the outside part of the residential unit also calnot be brought within the purview of an inner measurement of a residential

15. Now what is to be seen is whether excluding the open terrace and the area of the portico, ald 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 beneht as is otherwise enshrined under Section 8O-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-lB 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 '1 \ PSIqJ & NNR,J is an open terrace and a portico, and for the reasons stated above, art open terace and a portico cannot be brought within the ambit of the dehnition of an "built-up" area as is defined under Section 8O-lB (la)(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 rs 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 aly 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 bc excluded from computation of the built-up a_rea entitling the appellant the benefit that which is enshrined under Section 80-lB of the Act L7. For all the aforesaid reasons, we are in unanimit5z in the course of endorsing the view expressed by the Division Bench in the case of Amaltas Associates (1 supra). Therefore, the instant appeal hled 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 20 16 also stand allowed. No costs. PSK,J & NNR,J 18, As a sequel, miscellaneous petitions, pending if any in these I i appeals, shall stand closed. /ITRUE COPY// oneFairS.oeJotid:l".,rt%"fF":#aJusrrcEP'sAMKo o"",rr:'1fi .,:rJJ,:o:[".,rf LT;"J5":#aJUSTT.ENARSTNG sd/- J t. NAGA LAKSHMI INT REGISTRAR SECTION OFFICER Y RAO NANDIKONDA To ,1 The lncome Tax Appellate Tribunal' HVderab-1{'A' Bench' Hyderabad i o;; il[ Mr ch Pushvam Kiran Advocate'o""laro*TMENT) topuc] ; o;; cc io r'lt J V. Prasad (sc FoR INCoME TAx i il"tti,eii"&".."t".v, union of lndia Ministry of Law' Justice and companv . t[3't;il.?t"ool'Iouo.r,". Association Library' High court ror the state or " i;Hs*;,-tiign Court Buildinss at Hvderabad' 7. Two CD CoPies Kam/PSL HIGH COURT DATED:21 10512025 a a, ? t '2 o !- i EL v .$ Y \s .) tlcrH a COMMON JUDGMENT lTTA.Nos.167 of 2012,229 ot 2016 & 230 ot 2016 ALLOWING THE APPEALS )"