2013 (10) TMI 1426 - AT - Income Tax

Tribunal upholds CIT(A)'s decision on deduction under 80IB(10) clarifying construction & compliance

Dy. Commissioner of Income Tax, Central Circle 1 (1), Pune Versus M/s. Sukhwani Buildcon

The Tribunal upheld the decisions of the CIT(A) in favor of the assessee, allowing the deduction u/s. 80IB(10). The Tribunal ruled that the construction ... Denial of deduction claimed u/s. 80IB(10) in respect of project Tulips - Held that:- Legal position it is settled that clause (d) will not apply if project is approved prior to 01-04-2005. In the present case, it is an admitted position that Tulip project was approved and commenced on 19- 03-2003. In view of the above, the objection of Assessing Officer in respect of construction of commercial user could not be sustained. It is also pertinent to mention that Assessing Officer himself has accepted in assessment order that commercial area of 8801 sq. ft. is within permissible limits of PCMC for housing project constructed in the residential zone. Therefore, commercial user constructed Tulip project was within the norms of PCMC for housing project. Accordingly, issue raised in ground No.1 & 2 has rightly been decided in favour of assessee because clause (d) inserted in the provisions of section 80IB(10) restricting commercial area has prospective effect from 01-04- 2005. We uphold the same. Violation of clause (c) on the basis of report given by Ward Inspector - Held that:- Material as available on record reveals that three flats were separately sold to Mr. Oomer K. George through separate deeds. Three electricity connections were provided for respective flats and even municipal authorities recognizes three flats by assessing them separately for the purpose of municipal taxes. There is apparently nothing on record that assessee has played a role in selling the flats in combined manner even purchaser Mr. Oomer K. George during appeal also confirmed the fact that three flats were joined by him and assessee has not played any role in the same. In view of the above objection on violation of clause (c) and in view of the merger of three flats by one Mr. Oomer K. George was not accepted by CIT(A) , accordingly disallowance of claim of deduction u/s. 80IB(10) on this ground was rejected and claim of assessee was allowed. This reason of factual legal finding needs no interference from our side. We upheld the same. Issues:1. Eligibility for deduction u/s. 80IB(10) based on violation of clause (d) regarding commercial area.2. Violation of clause (c) of Sec. 80IB(10) due to excess area in a housing project.Issue 1: Eligibility for deduction u/s. 80IB(10) based on violation of clause (d) regarding commercial area:The revenue contended that the project exceeded the permissible commercial area, thus challenging the eligibility for deduction u/s. 80IB(10). The Assessing Officer found a violation of clause (d) due to the construction of commercial area exceeding the limit specified. However, the CIT(A) and the Tribunal held that the amendment in clause (d) was prospective and not retrospective, following the decision in the case of Brahma Associates. They emphasized that the commercial user was within the norms of the local authority and that the project was approved before the relevant amendment. Therefore, the objection by the Assessing Officer was not sustained, and the deduction was allowed.Issue 2: Violation of clause (c) of Sec. 80IB(10) due to excess area in a housing project:The Assessing Officer alleged a violation of clause (c) based on the combination of three flats exceeding the prescribed area limit. However, the CIT(A) found that the flats were sold separately with individual electricity meters and assessed separately for municipal taxes. The CIT(A) concluded that the assessee did not play a role in combining the flats, and the purchaser confirmed the independent sale of the flats. Therefore, the violation of clause (c) was rejected, and the deduction u/s. 80IB(10) was allowed. The Tribunal upheld this decision, emphasizing the factual and legal findings supporting the assessee's position.In summary, the Tribunal dismissed the revenue's appeals, upholding the decisions of the CIT(A) in favor of the assessee regarding the eligibility for deduction u/s. 80IB(10) based on the commercial area and the alleged violation of clause (c) in the housing project. The judgment highlighted the importance of compliance with statutory provisions and the retrospective or prospective application of relevant amendments in tax laws.