Tribunal allows deduction despite violations, clarifies commercial area limit within housing projects

The Tribunal held that the assessee is eligible for deduction under Section 80IB(10) despite violating provisions, citing the decision in the case of Brahma Associates. The Tribunal interpreted the amendment in Section 80IB(10) to allow a limited commercial area within housing projects for deduction. Additionally, the Tribunal upheld the allowance of deduction under Section 36(1)(iii) for interest expenditure on work in progress. The appeal was ultimately dismissed with no order as to costs.

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Issues involved:
The judgment involves the following issues:
1. Eligibility for deduction u/s 80IB(10) despite violation of provisions.
2. Interpretation of the amendment in Section 80IB(10) regarding commercial area in housing projects.
3. Allowance of deduction under Section 36(1)(iii) for interest expenditure on work in progress.

Issue 1: Eligibility for deduction u/s 80IB(10)
The Tribunal held that the assessee is eligible for deduction u/s. 80IB(10) despite violating the provisions, citing the decision in the case of Brahma Associates. The Tribunal's decision was based on the premise that the amendment in Section 80IB(10) with the insertion of clause (d) w.e.f. 1/4/2005 does not apply to assessment years prior to A.Y. 2005-06. The Tribunal disregarded the fact that the said decision is under challenge with an SLP filed by the Income Tax Department.

Issue 2: Interpretation of the amendment in Section 80IB(10)
The Tribunal also ruled in favor of the assessee, allowing deduction u/s. 80IB(10) based on the decision in Brahma Associates. The Tribunal held that the insertion of clause (d) in Section 80IB(10) from 1/4/2005 does not apply to assessment years before A.Y. 2005-06. It was noted that prior to this amendment, only housing projects without any commercial unit were eligible for deduction u/s. 80IB(10), and the amendment provided a relaxation by allowing a limited commercial area within the housing project.

Issue 3: Allowance of deduction under Section 36(1)(iii)
The Tribunal upheld the order of the CIT(A) allowing deduction under Section 36(1)(iii) for interest expenditure allocable to work in progress forming part of closing stock. This decision was based on the Tribunal's earlier rulings for AY 1997-98, despite the fact that similar decisions for AY 2000-01 were under appeal before the Bombay High Court. The High Court declined to entertain this issue based on the reasons mentioned in a previous order related to a different assessment year.

The appeal was ultimately dismissed with no order as to costs.

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