Tribunal allows deduction for housing project despite non-compliance with plot size, commercial space

The Tribunal ruled in favor of the assessee regarding the disallowance of deduction under section 80IB(10) for a housing project. Despite non-compliance with the minimum plot size requirement and the presence of commercial space within the project, the Tribunal allowed a margin of 10% for commercial area and determined that the deduction cannot be refused based on non-compliance with the relevant clause. The Tribunal also found no violation of conditions related to plot size, emphasizing the treatment of the plots as a single entity and including all relevant areas in the calculation. Ultimately, the Tribunal directed the Assessing Officer to allow the deduction claimed by the assessee.

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Issues:
1. Disallowance of deduction under section 80IB(10) for a housing project.
2. Non-compliance with conditions related to plot size and built-up area.
3. Discrepancy in plot size determination.

Issue 1: Disallowance of deduction under section 80IB(10)
The appeal pertains to the disallowance of the assessee's claim for deduction of Rs. 11,53,650 under section 80IB(10) of the Income Tax Act for the assessment year 2004-05. The Assessing Officer denied the deduction, citing that the 'Umiya Complex' project was not entirely residential, containing both residential flats and commercial space. The CIT(A) upheld this decision, adding that the project did not meet the minimum plot size requirement of one acre. However, the Tribunal referred to a previous judgment allowing a margin of 10% for commercial area within a housing project. As the commercial area in 'Umiya Complex' was only 1.36% of the total built-up area, the Tribunal ruled in favor of the assessee, stating that the deduction cannot be refused based on non-compliance with clause (c) of section 80IB(10).

Issue 2: Non-compliance with conditions related to plot size and built-up area
The CIT(A) raised concerns about the plot size of the 'Umiya Complex' project, noting that after excluding an area for a road, the plot size fell below the required one acre. However, the Tribunal analyzed various documents provided by the assessee, including the development agreement, approved plans, and correspondence with the approving authority. The Tribunal found that both plots of land forming the project were treated as a single entity, with the total plot size meeting the one-acre requirement even after considering the excluded road area. Additionally, the Tribunal emphasized that the recreation open space within the plot should not be excluded when determining the plot size under clause (b) of section 80IB(10). Consequently, the Tribunal concluded that there was no violation of the conditions related to plot size.

Issue 3: Discrepancy in plot size determination
The CIT(A) incorrectly excluded a portion of the plot area for a road setback, leading to a miscalculation of the total plot size. The Tribunal highlighted that the excluded area was only for the road setback and did not diminish the overall plot size. By considering all relevant documents and the treatment of the plots as a single project, the Tribunal determined that the plot size met the statutory requirements. Therefore, the Tribunal directed the Assessing Officer to allow the deduction claimed by the assessee under section 80IB(10), ultimately ruling in favor of the assessee.

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