JUDGMENT N. Kumar , J.—The Revenue has preferred this appeal challenging the order passed by the Tribunal wherein it has been held that the assessee is entitled to claim deduction under Section 80-IB(10) of the IT Act, 1961 (hereinafterreferred to as "the Act") on pro rata basis in respect of those flats, thebuilt-up area of which was not more than 1500 sq. ft. The assessee is a partnership firm engaged in the business of construction and sale of flats. The assessee entered into jointdevelopment agreement with Sri Mahaveer Ranka for building aresidential project called 'Paramount Raghavendra Arisht' which consistsof 160 flats. The assessee had claimed deduction of the entire net profitof Rs. 36 crores relating to the said residential complex under Section 80-IB(10) of the Act for the asst. yr. 2007-08, which was rejected bythe assessing authority for the reason that the built-up area of some ofthe flats exceeded 1500 sq. ft. The said order was challenged before theCIT(A). The appellate authority partly allowed the appeals holding thatthe assessee is entitled for the said deduction on pro rata basis. TheRevenue challenged the said order before the Tribunal. The Tribunal dismissed the appeal holding that the assessee is entitled to the saiddeduction on pro rata basis in respect of those flats, the built-up area ofwhich does not exceed 1500 sq. ft. Aggrieved by the said order, theRevenue is in appeal. 2. The material on record discloses, the building consists of 160apartments comprising of duplex flats, 2 BHK and 3 BHK flats. Duringthe survey, flats-wise details of built-up area, as well as super built-uparea were gathered. The built-up area of duplex flats cover ground andmezzanine floors and over these floors 1st, 2nd and 3rd floors consistingof 2 BHK and 3 BHK flats are constructed. Built-up area of duplex flatsand some 3 bedroom flats are shown in the range of 1404 to 1488 sq. ft.Super built-up areas are shown more than 1800 sq.ft. With a view toascertain whether these duplex flats and 3 bedroom flats comply withrequirements of s. 80-IB(10), a reference was made to DVO vide letter dt.9th Oct., 2007. The DVO after inspection of the building, submitted areport in his letter dt, 6th Nov., 2007 stating that duplex flats bearingNos. A-1, A-13, A-11, L-9, L-17 and L-20 have plinth area rangingbetween 1842 to 2614 sq. ft. When the assessee was confronted with thisreport the assessee vide letter dt. The DVO after inspection of the building, submitted areport in his letter dt, 6th Nov., 2007 stating that duplex flats bearingNos. A-1, A-13, A-11, L-9, L-17 and L-20 have plinth area rangingbetween 1842 to 2614 sq. ft. When the assessee was confronted with thisreport the assessee vide letter dt. 6th Dec, 2007 replied that the DVOerred in giving his report by including the common areas shared withother flats and even those areas which are not part of flat measurementare included in the flat measurement. The assessee also enclosed areport from a private valuer showing plinth area of these flats as lessthan 1500 sq. ft. He also specifically pointed out the areas to beexcluded. These submissions of assessee along with their valuers reportwere forwarded to the DVO, inviting their comments. After reinspection ofthe building, the DVO Bangalore submitted his comments in his letter dt.28th March, 2008. With regard to built-up area i.e., plinth area herevised the figures and showed flat area excluding coveredbalcony/covered garden/covered passage in respect of duplex flats asranging from 1450 to 1474 sq. ft. The A-1 flat area was given as 1474 sq.ft. With regard to balconies it was mentioned that the duplex flatsbearing Nos. A-13, A-11, L-20, L-9 and L-17 have balconies but thesebalconies of this flat on mezzanine floor are only approachable toadjoining duplex flat A-2 owner. This balcony is about 51.71 sq. mtrs.which works out to 556.6 sq. ft. The ground floor area of 51.71 sq. mtrs.of this flat appurtenant to this flat was stated to have been covered bygarden in the passage. To make it clear, the balcony in the mezzaninefloor of A-1 and A-2 of 556.60 sq. ft. is so located that the bedroom doorsof A-1 and A-2 open out to this big balcony and no other flat owners canwalk into this balcony. The assessee's records show plinth area of A-1duplex flat as 1484 sq. ft. and super built-up area as 1929 sq. ft. anddifference is on account of inclusion of common area calculated as 30 percent over plinth area. The adjoining duplex flat A-2 is shown to haveplinth area of 1485 sq. ft. and super built-up area of 1931 sq. ft. According to the assessee the plinth area is essentially the internal floorarea of the flat. ft. anddifference is on account of inclusion of common area calculated as 30 percent over plinth area. The adjoining duplex flat A-2 is shown to haveplinth area of 1485 sq. ft. and super built-up area of 1931 sq. ft. According to the assessee the plinth area is essentially the internal floorarea of the flat. As per the definition provided in s. 80-IB(14), built-uparea means inner and balcony as increased by the thickness of the wallsbut does not include common areas shared with other residential units.Since the balcony area of each flat is also to be included for arriving atbuilt-up area as per the above definition in the Act, the floor area of A-1duplex flat of 1484 sq. ft. would be increased with the balcony area ofthis flat in the mezzanine floor. Half of the area of this balcony whichcomes to 278.30 sq. ft. should be clubbed with floor area and then thebuilt-up area of A-1 duplex flat would be 1762.3 sq. ft., the built-up areaadjoining duplex flat A-2 calculated in this manner would be also 1762.3sq. ft. Similarly, if proportionate balcony area is added to flats bearingNos. 3 and 4 of block A, 5, 6, 7 and 8 of block B, 1, 2, 3 and 4 of block C,5, 6, 7 and 8 of block D, the built-up area including half the area of thebalcony exceed 1500 sq. ft. The assessing authority refused to treat thebalcony area in respect of A-1 and A-2 flats on the ground that other flatowners have no access and the access is only to the owners of these twoflats. Therefore, the appellate authority denied the benefit under Section 80-IB(10) of the Act. However, the appellate authority denied the benefitsonly to the 16 flats whose built-up area is more than the prescribed limitof 1500 sq. ft. Therefore he directed the AO to proportionately calculatethe disallowance to be made under Section 80IB in proportion to the area ofthese 16 flats and restrict the disallowance under Section 80IB of the Act onlyto the same. He held for the balance area the assessee would be entitledto the benefit. The Tribunal accepting the findings of the first appellateauthority dismissed the appeal. It is against the said order the Revenueis in appeal. 3. The learned counsel for the Revenue contends that when once theviolation of s. 80-IB(10) of the Act is established, the assessee forfeits hisright to claim exemption. The Tribunal accepting the findings of the first appellateauthority dismissed the appeal. It is against the said order the Revenueis in appeal. 3. The learned counsel for the Revenue contends that when once theviolation of s. 80-IB(10) of the Act is established, the assessee forfeits hisright to claim exemption. When that being the case the appellateauthority committed a serious error in extending the benefitproportionately, which is outside the scope of s. 80-IB(10) of the Act.Therefore, he submits that the said order requires to be set aside. 4. Per contra, the learned counsel appearing for the assessee submitsthat as is clear from the aforesaid facts, the balconies do not exclusivelybelong to the owners of the flats. It has to be shared with others. Sub-s.(14)(A) of s. 80-IB where the built-up area is defined, makes it explicitlyclear that the common area shared with other residential units has to beexcluded for the purpose of calculating built-up area to extend the benefitof s. 80-IB(10) of the Act. Once this balcony area is excluded, none of theflats' built-up area exceeds 1500 sq. ft. Therefore, the assessee is entitledto the said provision completely, though the appellate authorities havedenied the said benefits to 16 flats. Therefore, he submits that no casefor interference is made. 5. Therefore the substantial question of law that arises for considerationin this appeal is: To be eligible for exclusion from the built-up area, whether the commonareas have to be shared with all the residents, who have occupied theresidential units, or even if it is shared with one, the assessee would beentitled to the said benefits 6. The Circular No. 5 of 2010 dt. 3rd June, 2010 [(2010) 232 CTR (St) 289: (2010) 40 DTR (St) 9] issued by the CBDT exercising the power under Section 119 of the Act explains rationalising the provisions of deduction under s.80-IB(10). The principal object behind this provision is to provide for 100per cent deduction of the profits derived by an undertaking fromdeveloping and building housing projects. In order to be eligible for thesaid benefit, the assessee should satisfy the following conditions : (a) The project has to be approved by the local authority before 31stMarch, 2007; (b) The project is constructed on a plot of land having a minimum area ofone acre; (c) The built-up area of each residential unit should not exceed 1500 sq.ft. in the cities of Delhi and Mumbai (including areas falling within 25kms. in the cities of Delhi and Mumbai (including areas falling within 25kms. of municipal limits of these cities) and 1500 sq. ft. in other places; (d) The built-up area of the shops and other commercial establishmentsincluded in the housing project should not exceed 5 per cent of the totalbuilt-up area of the housing project or 2000 sq. ft., whichever is less. (e) The project has to be completed within four years from the end of thefinancial year in which the project is approved by the local authority. Once these conditions are fulfilled, the assessee would be entitled to thebenefit flowing from the aforesaid provision. By a subsequentamendment, the project approval by the local authority was extended to31st March, 2008. The object of the aforesaid tax concession is to providetax benefit to the person undertaking the investment risk i.e. the actualdeveloper. However, any person undertaking pure contract risk is notentitled to the tax benefits. With a view to clarify accordingly, anExplanation after sub-s. (1) of s. 80IB has been inserted so as to providethat nothing contained in sub-section shall apply to any undertakingwhich executes the housing project as a works contract awarded by anyother person including Central or State Government. This amendmenthas been made applicable with retrospective effect from 1st April, 2001and will accordingly apply in relation to asst. yr. 2001-02 andsubsequent assessment years. Further, the objective of the tax benefit forhousing projects is to build housing stock for low and middle incomehouseholds. This has been ensured by limiting the size of the residentialunit. Therefore, while interpreting s. 80-IB(10) this object has to be kept in mind and if there is any ambiguity or difficulty, it is the substance,which has to be preferred to the format. Keeping in mind the fact thatwhile implementing these projects at the ground level, the buildersencountered innumerable problems. This has been ensured by limiting the size of the residentialunit. Therefore, while interpreting s. 80-IB(10) this object has to be kept in mind and if there is any ambiguity or difficulty, it is the substance,which has to be preferred to the format. Keeping in mind the fact thatwhile implementing these projects at the ground level, the buildersencountered innumerable problems. If there are minor defects in theconstruction put up, which is unintentional or by which they have notmade any special gains of money, the benefit which is accrued to themunder this provision should not be denied on that score for the mainobject sought to be achieved by introduction of this provision is achievedwhile considering the claim for benefit under this provision, theauthorities should lean in favour of encouraging such housing projectsand not discouraging the persons from taking up such housing projects.It is in this context probably that obstacles were put in assessee's gettingthe benefit, the legislature introduced the definition of built-up area,which is very crucial factor in determining the benefit of tax to theassessee, which reads as under: (14)(a) 'built-up area' means the inner measurements of the residentialunit at the floor level, including the projections and balconies, asincreased by the thickness of the walls but does not include the commonareas shared with other residential units;" 7. Therefore the intention is clear. In calculating the built-up area it isonly the inner measurements of the residential unit on the floor level,which have to be taken into consideration. If there are any projectionsand balconies and if it exclusively belongs to the residential units, then,that also has to be taken into consideration for deciding the built-uparea. However, if the said residential unit is provided the facility ofcommon area shared with other residential units such common areashave to be excluded while computing the built-up area. The languageemployed in defining built-up area as the common area shared withother residential units, it does not mean that every common areashould be shared with other residential units. If that area does notexclusively belong to the owner of the residential unit and if he has toshare that common area with the owner of another residential unit,then that common area has to be excluded from the built-up area. Ifthis principle is kept in mind and applied to the facts of this case, inrespect of 16 flats, the common area is shared by these 16 owners ofresidential units. Ifthis principle is kept in mind and applied to the facts of this case, inrespect of 16 flats, the common area is shared by these 16 owners ofresidential units. In respect of A-1 and A-2 the common area is sharedby the owners of flats A-1 and A-2. This common area is not thesubject-matter of sale as is clear from the recitals in the sale deed. Inother words, the owners of the residential units do not have exclusiveright to use these balconies as they have to share it with others. It isimmaterial whether they have to share it with other 159 owners of theresidential units or they have to share it with the adjoining owner ofthe residential unit, this area cannot be taken into consideration todecide the built-up area. From the facts, it is clear that if this balcony space is excluded all the 160 units are less than 1500 sq. ft. andtherefore the assessee was entitled to 100 per cent tax exemption onthis project. However, the appellate authority as well as the Tribunal have not extended the said benefit to 16 residential units. As theassessee has not preferred any appeal against the said order, it will notbe appropriate for this Court to extend the said benefit in theseproceedings. However, as the law stands today, in view of theinterpretations placed by them on the aforesaid provisions, theassessee has not violated the provisions of s. 80-IB(10) of the Act and infact was entitled to 100 per cent tax exemption on the profits derivedfrom the project. Therefore the substantial question of law framed isanswered in favour of the assessee and against the Revenue. Therefore, we do not see any merit in this appeal and accordingly theappeal is dismissed. No costs.