2016 (2) TMI 1045 - AT - Income Tax

Tribunal allows assessee's deduction under Section 80IB(10) for compliant units, excludes certain areas

The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, confirming the eligibility for deduction under Section 80IB(10) on ... Deduction u/s. 80IB(10) - only reason for rejecting the claim of the assessee given in the assessment order is that two dwelling units i.e. RH/D-6 and RH-3 are having built up area in excess of 1500 sq. ft. - Held that:- The Tribunal in various decisions has held that the assessee is eligible to claim deduction u/s. 80IB(10) on the eligible dwelling units. The view of the Tribunal has been upheld by various Hon'ble High Courts. The Co-ordinate Bench of the Tribunal in the case of M/s. Rohan Homes Vs. Asstt. Commissioner of Income Tax (2013 (10) TMI 758 - ITAT PUNE ) in similar case where deduction u/s. 80IB(10) was claimed and some of the residential units were having built up area in excess of specified limit, the Tribunal granted proportionate deduction to the eligible units. While holding so, the Tribunal referred to various decisions of the Tribunal, wherein proportionate deduction u/s. 80IB(10) was granted to the housing projects. Deduction u/s 80- IB(10) of the Act was to be allowed on proportionate basis with reference to qualifying residential units and that the assessee would not be denied claim for deduction u/s 80-IB(10) of the Act in entirety if some of its residential units were of a built-up area exceeding the limit prescribed in clause (c) to sec. 80-IB(10) of the Act. Excluding residential units RH/D-6 and RH-3 of project ‘Akshay Park’ from the purview of deduction u/s. 80IB(10) on the ground that the ‘built up area’ of said units are in excess of 1500 sq. ft. - Held that:- The issue whether the definition of ‘built up area’ as defined u/s. 80IB(10) is to be applied in case of projects approved prior to 01- 04-2005 is no more res-integra. In view of the decisions of Co-ordinate Bench on the issue, we hold that prior to the insertion of definition of ‘built up area’ by the Finance (No. 2) Act, 2004 w.e.f. 01-04-2005, projections, balconies and open terrace cannot be considered as part of the ‘built up area’ of the residential unit. The newly inserted definition of ‘built up area’ would be applicable only on the projects which are approved/sanctioned after 01-04-2005. In view of the facts of the case and various decisions discussed above, we allow the cross objections by the assessee. Issues Involved:1. Eligibility of deduction under Section 80IB(10) of the Income Tax Act, 1961.2. Pro-rata basis deduction under Section 80IB(10).3. Definition and applicability of 'built-up area' for projects approved before 01-04-2005.Issue-wise Detailed Analysis:1. Eligibility of Deduction under Section 80IB(10):The primary issue was whether the assessee was eligible for deduction under Section 80IB(10) of the Income Tax Act, 1961 for the assessment year 2009-10. The assessee firm, engaged in property development, claimed a deduction of Rs. 1,57,99,619/- for a project named 'Akshay Park'. The Assessing Officer (AO) denied the deduction, stating that two units (RH/D-6 and RH-3) exceeded the permissible built-up area limit of 1500 sq. ft. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this finding but allowed a proportionate deduction by excluding the two units. The Revenue appealed against this decision, arguing that the entire project should be disqualified from the deduction if any unit exceeds the built-up area limit.2. Pro-rata Basis Deduction under Section 80IB(10):The Revenue contended that there was no provision in the Act for granting deduction on a pro-rata basis for eligible units. The Tribunal, however, disagreed, citing multiple precedents where pro-rata deductions were allowed. The Tribunal referenced cases such as CIT Vs. Arun Excello Foundations (P.) Ltd. and decisions of the Co-ordinate Bench in M/s. Rohan Homes and Belvalkar Housing Schemes, which supported the view that deduction under Section 80IB(10) could be granted on a pro-rata basis for eligible units. The Tribunal upheld the CIT(A)'s decision to allow proportionate deduction, dismissing the Revenue's appeal.3. Definition and Applicability of 'Built-up Area':The assessee argued that the built-up area of the two disputed units was within the permissible limit if projections and balconies were excluded. They further contended that the definition of 'built-up area' as per Section 80IB(14) introduced by the Finance (No. 2) Act, 2004, effective from 01-04-2005, should not apply to their project, which was sanctioned in 2001. The Tribunal agreed, referencing decisions such as Haware Constructions (P) Ltd. Vs. Income Tax Officer and Income Tax Officer Vs. M/s. Prime Properties, which held that the definition of 'built-up area' introduced in 2004 does not apply to projects approved before 01-04-2005. Consequently, projections, balconies, and open terraces should not be included in the built-up area for such projects. The Tribunal allowed the assessee's cross-objection, affirming that the project met the conditions for deduction under Section 80IB(10).Conclusion:The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection, confirming that:- The assessee is eligible for deduction under Section 80IB(10) on a pro-rata basis for units complying with the built-up area limit.- The definition of 'built-up area' effective from 01-04-2005 does not apply to projects sanctioned before this date.- Projections, balconies, and open terraces should not be included in the built-up area for projects approved prior to 01-04-2005.Order Pronounced:The order was pronounced on Wednesday, the 03rd day of February, 2016.