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Issues: Whether the assessee was entitled to deduction under section 80IB(10) in respect of its housing projects where the approval for construction was granted by the Gram Panchayat and the Revenue contended that such approval was not by a competent local authority for the project as a whole.
Analysis: The Tribunal noted that the controversy had already been considered in the assessee's own earlier years and that the relevant village Panchayat had authority under section 52 of the Bombay Village Panchayat Act, 1958 to sanction construction within village limits. The Tribunal also relied on the consistent view taken by coordinate Benches that a Gram Panchayat can function as a local authority for the purpose of approval of a housing project, and that exemption and deduction provisions are to be construed reasonably and in favour of the assessee where the factual matrix shows development and construction of residential units. In that background, the Tribunal found no infirmity in the first appellate order allowing the claim.
Conclusion: The assessee satisfied the requirement of approval by the competent local authority and remained eligible for deduction under section 80IB(10).
Ratio Decidendi: Where the village Panchayat is competent under the governing local law to sanction construction within village limits, its approval can satisfy the local-authority approval requirement for deduction under section 80IB(10), and exemption provisions are to be construed reasonably in favour of the assessee.
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