2012 (3) TMI 500 - AT - Income Tax

Tribunal allows deduction under section 80IB(10) for residential project

They Dy. Commissioner of Income-tax Central Circle-1, Versus. M/s. Neel Sidhi Enterprises

The Tribunal upheld the CIT(A)'s decision, allowing the appellant's claim for deduction under section 80IB(10) for the assessment years 2005-06, 2006-07, ... Claim of deduction u/s.80IB(10) - Held that:- In the present case it is undisputed that the project had started much before 01.04.2005, which is evident from the Allotment letter dated 09.09.2002 and Commencement certificate dated 29.07.2003. Thus, once the project has been started prior to 01.04.2005, the amendment brought u/s.80IB(10)(d) from 01.04.2005. The contention of the learned CIT(DR) that the benefit of 80IB(10)(d) as stood prior to 01.04.2005 will not be applicable from the Assessment Year 2005-06 onwards, does not hold any ground - Decided against revenue Issues Involved:1. Disallowance of claim of deduction under section 80IB(10).2. Eligibility for deduction under section 80IB(10) for projects with commercial units.3. Applicability of the decision in Brahma Associates vs. JCIT for different assessment years.4. Segregation of commercial and residential units for deduction purposes.Detailed Analysis:Issue 1: Disallowance of Claim of Deduction under Section 80IB(10)The department appealed against the CIT(A)'s order allowing the deduction under section 80IB(10) for the assessment years 2005-06, 2006-07, and 2007-08. The appellant, a partnership firm engaged in developing housing projects, claimed a deduction under section 80IB(10) for the project 'Neel Siddhi Splendour.' The Assessing Officer disallowed this deduction, arguing that the project included commercial units, which made it ineligible under section 80IB(10).Issue 2: Eligibility for Deduction under Section 80IB(10) for Projects with Commercial UnitsThe appellant firm was allotted land by CIDCO Ltd. for developing residential and commercial units. A portion of the land (777 sq. mtrs) meant for commercial use was sold to another firm, 'M/s. Thakkar Enterprises.' The Assessing Officer argued that the entire project, including the commercial area, constituted a single integrated project, thereby disqualifying it from the deduction under section 80IB(10). The CIT(A) disagreed, stating that the commercial area developed by 'M/s. Thakkar Enterprises' was not part of the appellant's project, making the appellant eligible for the deduction.Issue 3: Applicability of the Decision in Brahma Associates vs. JCIT for Different Assessment YearsThe department contended that the decision in Brahma Associates vs. JCIT, which allowed deductions under section 80IB(10) for projects with commercial units, was applicable only for assessment years before 2005-06. However, the CIT(A) and the Tribunal found that since the project commenced before the amendment to section 80IB(10)(d) effective from 01.04.2005, the decision in Brahma Associates was applicable. The Tribunal cited multiple decisions, including the Bombay High Court's ruling in CIT vs. Brahma Associates, affirming that projects approved before the amendment are eligible for the deduction.Issue 4: Segregation of Commercial and Residential Units for Deduction PurposesThe Tribunal agreed with the CIT(A) that the commercial area sold to 'M/s. Thakkar Enterprises' should be segregated from the residential project. Consequently, the remaining residential project developed by the appellant was eligible for the deduction under section 80IB(10). The Tribunal referenced the ITAT Mumbai Bench decision in Saroj Sales Organisation vs. ITO, which allowed for the segregation of eligible and ineligible units under a single sanction plan.Conclusion:The Tribunal upheld the CIT(A)'s decision, allowing the appellant's claim for deduction under section 80IB(10) for the assessment years 2005-06, 2006-07, and 2007-08. It concluded that the commercial area developed by 'M/s. Thakkar Enterprises' was a separate project, making the appellant's residential project eligible for the deduction. The Tribunal dismissed the department's appeals, affirming that the amendment to section 80IB(10)(d) effective from 01.04.2005 did not apply to projects commenced before this date.